Best Bitcoin ETFs Of February 2022
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Best Bitcoin ETFs Of February 2022
Updated: Feb 9, 2022, 9:47am
Bitcoin is a newcomer to the world of exchange-traded funds (ETFs). Bitcoin ETFs allow investors to get exposure to the enticing potential of the most popular cryptocurrency without having to safely store it.
Currently, Bitcoin ETFs can only hold Bitcoin futures contracts or stocks of companies and other ETFs with exposure to cryptocurrency. The Security and Exchange Commission (SEC) continues to evaluate whether it wants to approve ETFs that own Bitcoin directly.
To help you understand this new corner of the ETF universe, Forbes Advisor has profiled all of the Bitcoin ETFs available today.
Best Bitcoin ETFs Of February 2022
ProShares Bitcoin Strategy ETF (BITO)
Expense ratio
0.95%
Assets under management
$1.0 billion
Investing strategy
Bitcoin futures
Simplify U.S. Equity PLUS GBTC ETF (SPBC)
Expense ratio
0.50%
Assets under management
$107 million
Investing strategy
S&P 500 and Bitcoin stocks
Valkyrie Bitcoin Strategy ETF (BTF)
Expense ratio
0.95%
Assets under management
$36 million
Investing strategy
Bitcoin futures
VanEck Bitcoin Strategy ETF (XBTF)
Expense ratio
0.65%
Assets under management
$18 million
Investing strategy
Bitcoin futures
Global X Blockchain & Bitcoin Strategy ETF (BITS)
Expense ratio
0.65%
Assets under management
$6.6 million
Investing strategy
Bitcoin futures and blockchain stocks
Valkyrie Balance Sheet Opportunities ETF (VBB)
Expense ratio
0.75%
Assets under management
$0.5 million
Investing strategy
Active
*All data is sourced from company filings and Morningstar, current as of Feb. 8, 2022.
Methodology
We have reviewed the six Bitcoin ETFs approved for trading by the SEC. There are currently 12 additional Bitcoin ETF filings waiting for SEC approval, some of which are for funds that directly own Bitcoin. When the world of Bitcoin ETFs grows, we will offer a more comprehensive methodology that selects the best from a larger universe of BTC funds.
Why Don’t Bitcoin ETFs Own Bitcoin?
As noted above, none of the six ETFs on our list own actual Bitcoin. Instead, they hold Bitcoin futures contracts, and in some cases the shares of companies and other ETFs active in the cryptocurrency space.
Bitcoin ETFs don’t own Bitcoin because the SEC is concerned that BTC is traded on non-regulated cryptocurrency exchanges. SEC Chair Gary Gensler is on the record stating that given the novel character of cryptocurrency, relying on the proven and highly regulated futures market is a much safer approach for Bitcoin exchange-traded funds.
Futures are an agreement between two parties to sell a particular asset at a future date. They allow traders to speculate about how prices may move in the future with minimal upfront investment because they frequently use leverage, or borrowed money.
Here’s how it works in the case of the ProShares Bitcoin Strategy ETF (BITO). The fund buys positions in one-month CME Bitcoin futures contracts. As the contracts near expiration, the fund gradually sells them and buys longer-dated contracts. As the price of BTC rises, BITO uses its gains to add to a pool of funding held in cash and Treasuries. If the price of BTC falls, it takes funds from the pool to pay for the losses on futures contracts.
This strategy isn’t perfect. Tracking the price of Bitcoin doesn’t always replicate the performance of the underlying market, and there are extra costs as the managers roll forward the futures contracts they’re buying.
Why Should I Buy a Bitcoin ETF Instead of Bitcoin?
Some investors may feel safer getting exposure to Bitcoin in their portfolios by purchasing a professionally managed ETF than they do owning actual BTC. Widespread adoption of Bitcoin as an investment is relatively recent, and some people may be concerned about hacking or losing passwords or private keys needed to access their investment when it’s stored in a secure Bitcoin wallet.
In addition, not everyone has found that buying Bitcoin via a cryptocurrency exchange is for them. While almost anyone can open a Coin base account, for instance, not everyone is comfortable doing so. Others may be restricted to buying and selling securities in their traditional brokerage accounts for various reasons.
Many people choose to invest for retirement in an individual retirement account (IRA) or a 401(k) plan. If a retirement investor would like to get a modest amount of exposure to Bitcoin without opening an account at a crypto exchange or a Bitcoin IRA, owning shares of a Bitcoin ETF isn’t a terrible option.
Bitcoin ETF Fees
Owning a Bitcoin ETF may be more expensive than simply purchasing Bitcoin on an exchange. Here’s why: Cryptocurrency exchanges typically charge one-time fees to purchase Bitcoin while owning a Bitcoin ETF incurs an annual expense ratio fee.
Say, for example, you want to buy Bitcoin on Binance.US, one of the low-fee leaders among crypto exchanges. You would likely pay 0.1% of your purchase price as a fee. This is drastically less than you might pay over the course of a year when you invest in a Bitcoin ETF, which all charge at least 0.50% per year.
But this trading fee isn’t all you have to keep in mind. You should also consider if you’ll want to transfer your Bitcoin off of your exchange to a separate hot or cold crypto wallet. If that’s the case, you’ll likely be on the hook for withdrawal fees, which are typically pretty small but vary by exchange.
At Binance.US, these clock in at $0.0005 per withdrawal transaction for Bitcoin. Depending on the amount of Bitcoin you’re transferring, that likely works out to be pretty negligible but is still important to keep in mind.
You’ll also want to consider your exit strategy. Even HODLers, or those Bitcoin investors who are holding on for dear life and plan to stick with the cryptocurrency long term, will likely eventually want or need to sell portions of their holdings. That means paying a trading fee again when you sell.
On Binance.US, you’d probably expect to pay about 0.2% of your Bitcoin’s value in total buying and selling it and ever so slightly more if you move it off of the exchange at any point during that process. That said, shorter-term holders of a fund may not mind the comparatively higher fees they incur because of the convenience ETFs provide.
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