Bitcoin has become a popular trade over the past decade, and the recent emergence of bitcoin exchange-traded funds (“ETFs”) makes it even easier for traders to play the original cryptocurrency’s volatility for profit. The best bitcoin ETFs offer low costs and almost perfectly match the crypto’s price performance.
Bitcoin ETFs offer another huge advantage for traders: It’s often easier and cheaper to buy bitcoin through your existing, established, and secure brokerage account than through a separate cryptocurrency exchange or different crypto-focused brokerage account. With traders thinking that it may be time to buy bitcoin, ETFs are an easy way to get in and out.
Plus, with a bitcoin ETF, you can leave the coin’s security to the fund company. You don’t need to take custody of the coin yourself and assume all the risk of keeping it safe.
Here are some of the best bitcoin ETFs, including their one-year returns and expense ratios.
How MarketWise Selected These Funds
Marketwise chose its top funds based on the following factors:
- Spot bitcoin ETFs that track bitcoin’s price movement
- A low expense ratio
- No leveraged funds
Since these funds all track the same thing, it’s wise to focus on costs.
Top Bitcoin ETFs: Overview
As you can see, the returns are effectively the same across the one-year period, even though the share price of each fund may differ, since these funds are all tracking the same asset.
As bitcoin rises 1%, each fund should rise 1% – exactly what you see here, with small differences. So you get bitcoin’s price moves in an easy-to-buy fund.
Is there one fund that’s better than another? They all provide the same exposure to spot bitcoin prices, so the real differentiator here is the fund’s expense ratio. The expense ratio is the fund’s annual fee expressed as a percentage of your investment in the fund.
SEE MORE: Flash Crash or Crypto Winter? – How to Trade Bitcoin
For example, the lowest-cost fund is the Grayscale Bitcoin Mini Trust at 0.15%. That would cost $15 annually for every $10,000 invested in the fund. For the two funds that charge 0.25%, the annual cost would amount to $25 per year for that same $10,000.
The difference is not that stark, but it does add up if you’re investing millions of dollars.
In any case, the funds here all charge low expense ratios, so they can be great ways to get bitcoin exposure without paying the often-high fees of buying the crypto through an exchange.
Plus, as mentioned above, you don’t have the responsibility of safeguarding your bitcoin stash. The fund company is paid to maintain the holdings. That may sound negligible, but investors have lost literally billions in bitcoins because they didn’t properly secure their holdings.
What Are the Advantages of Bitcoin ETFs?
Buying bitcoins through ETFs is a smart way to trade the cryptocurrency and eliminates many of the downsides of buying it directly.
- Closely tracks bitcoin’s movements:These spot ETFs track the price of bitcoin with high accuracy, so you really are getting the same percentage movements.
- Low fund cost:These funds all charge low expense ratios, so you’re not paying that much for the advantages you bring to the table. The expense ratio is deducted seamlessly from the fund’s net asset value each day. You won’t even notice it’s gone.
- No need to secure your bitcoins:Bitcoin proponents may say that you need to secure your bitcoins yourself. If you do this, you have the potential to lose access to them or a drive they may be saved on. With ETFs, the fund company takes care of all securities.
- Easy to trade with a well-regarded broker: You likely already have an account with an existing online broker, so trading ETFs is just an extension of your existing account. You needn’t open an account with a potentially dubious crypto exchange to get in the game.
- No-commission trading:You can trade ETFs for no commission at virtually all discount brokers, unlike many crypto exchanges, which can charge expensive fees to buy coins.
- Options trading on bitcoin funds:Many bitcoin ETFs have options trading on them. With options, you can leverage your wager on the crypto or even profit when it declines. (That’s one of a few high-risk, high-reward ways to play a bitcoin rebound.)
Of course, these funds are simply tracking bitcoin. They’re not an argument to buy or sell bitcoin. Whether bitcoin itself will do well or poorly is a completely different question, with many investors thinking it’s a great way to hedge the risk of the U.S. dollar’s long-term decline.
But if bitcoin is your goal, these funds are a great way to trade it.
Regards,
James Royal
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