Just seventeen months following their introduction, U.S. spot bitcoin ETFs have built up a total of 1,283,847 BTC across the entirety of the products. That’s about $84.7 billion worth of BTC assets. By comparison, that’s a greater amount of bitcoin than any other sovereign nation, aside from a select few, holds via typical brokerage accounts, not exchanges/wallets.
What the ETF is actually doing with your capital
Starting to compare funds is the second step and that must be done after understanding the working of these funds. The actual Bitcoin spot ETF product actually purchases and holds Bitcoin with a custodian. The process will involve issuing ETF shares that track the price of Bitcoin, without you ever holding the bitcoin yourself or owning a wallet or a set of keys. You simply have a stake in bitcoin. The catch is the management fees that need to be paid for utilizing this service. A management fee not paid by the investor in their brokerage account. This management fee will be deducted from their Bitcoin holding.
The fund sells a small part of its Bitcoin every day and this is done to cover up the costs. After one year of owning IBIT at 0.25 percent, each share amounts to roughly 0.25 percent less Bitcoin in comparison to what it did at purchase.
Let’s take an example. On a position worth roughly 0.564 BTC, five years of fees drag your actual exposure down by approximately 0.007 BTC. At current prices, this can be called a real number and this cannot be termed as a rounding error or such. The gap keeps on compounding.
iShares Bitcoin Trust (IBIT)
It’s the leader in terms of everything you could want. At the time of writing, the fund holds 770,853 BTC as of the middle of June and this is about 4x as many shares as the next largest holder.
BlackRock’s bid-ask spread on its fund is ranging around 0.02 percent, the best in class and important if the market participants are trading in size or options. It also has the largest listed options market for any spot Bitcoin ETF, making it a standard place for institutional desks who are taking long-term, structurally driven positions to put their funds. Expense ratio comes up at 0.25 percent with the custodian: Coinbase Custody May brought $1.01 billion of single-month outflows and it is the biggest single-month outflow from any of the ETFs.
Fidelity Wise Origin Bitcoin Fund (FBTC)
FBTC also manages 179,931 BTC and follows the same charges of 0.25 percent just like IBIT. It differentiates itself on custody: It’s the only big Bitcoin spot ETF in this class that does not depend on Coinbase. FBTC makes the use of Fidelity Digital Assets, the asset manager’s in-house digital custody solution, which had been built up and established well before the product began trading. That is important to investors seeking to mitigate custody concentration risk among products on a wider basis. As so many products in this product category are custodized via Coinbase Custody, a failure at that single point may simultaneously hurt nearly all of these products. For this fund, it is safe from that problem.
Grayscale Bitcoin Mini Trust (BTC)
At 0.15 percent, this fund is the cheapest spot Bitcoin ETF option and stands out as less expensive than higher-priced alternatives IBIT and FBTC. It is just a bit more cost-efficient than the youngest options available in the market right now and was introduced by Grayscale, the company that is segregating assets off from its more costly GBTC Fund into this cheaper ETF option. For comparison, GBTC is 1.50 percent but has repeatedly suffered asset outflows even after the low-cost spot Bitcoin ETFs became available. The Mini Trust at present has 52,856 BTC.
ARK 21Shares Bitcoin ETF (ARKB)
ARK 21Shares Bitcoin ETF holds 33,248 BTC and has a 0.21 percent expense ratio and this makes it one of the most cost-efficient options of the two dominant funds. It’s a joint product made up of Cathie Wood’s ARK Invest and 21Shares, which are crypto-native investment firms. The asset under management (AUM) has seen a growth to approximately $3.6 billion. ARKB uses Coinbase Custody and benchmarks against the CME CF Bitcoin Reference Rate New York Variant.
Bitwise Bitcoin ETF Trust (BITB)
This fund rounds out the practical shortlist. Expense ratio: 0.20 percent. BTC holdings: 36,913. Bitwise is a crypto-native asset manager rather than a traditional finance institution, and the fund has maintained a clean track record on execution and transparency since launch. Custody is through Coinbase. At 0.20 percent, it sits between the fee leaders and the big two, with adequate liquidity for most retail and smaller institutional positions.
