There are several Bitcoin ETFs, so if one wants to opt for this investment method in BTC, it is necessary to ask which is the best.
However, there is no single answer to this question, because there is not a single ETF that surpasses any other similar derivative product in all aspects and for all the characteristics that an ETF can have.
Summary
- ETF or ETP?
- Choosing the best Bitcoin ETF based on AUM
- Why volumes are important in choosing a Bitcoin ETF
- The costs
- The custody
ETF or ETP?
First of all, it must be said that spot Bitcoin ETFs are traded mainly on the US exchanges.
This means that if you do not have direct or indirect access to the American platforms, you cannot invest in ETFs on BTC spot.
For example, on the European markets, there are no actual crypto ETFs, but more generic ETPs, including in particular ETNs.
The term ETP (Exchange Traded Product) more generally refers to the large family of financial products that can be traded on the stock exchange.
The ETF (Exchange Traded Funds) are the most well-known subspecies of ETP, and specifically, they are equity funds whose shares are tradable on the stock exchange. Their particularity lies in the fact that the underlying asset is directly owned by the fund, and the latter is in turn directly owned by the shareholders. In this way, those who purchase ETF shares are effectively also purchasing a portion of the underlying asset.
Another subspecies of ETP are the so-called ETN (Exchange Traded Note), that is, notes traded on the stock exchange.
The difference between an ETF and an ETN is that those who own such notes do not actually own the underlying asset, even indirectly, as is the case with ETFs.
On the European stock exchanges, there are no crypto ETFs, but only crypto ETNs.
A third subspecies are the ETC (Exchange Traded Commodity).
When choosing a crypto derivative financial product to invest in, it is important to always keep this distinction in mind, especially because it might not be straightforward to have direct access to the actual ETFs.
Choosing the best Bitcoin ETF based on AUM
Generally, ETF rankings are primarily compiled based on AUM (Asset Under Management), which is the value of the assets under management.
You can also use the NAV (Net Asset Value), because in theory the NAV of a single-asset ETF should be proportional to the AUM.
Single-asset ETFs are those that have a single underlying asset, such as those on BTC spot.
The ETF on Bitcoin with the largest AUM is IBIT by iShares (or BlackRock). With its 662,000 BTC, it currently has assets under management of nearly 70 billion dollars.
In second place is FBTC by Fidelity, with 20.6 billion, while in third is GBTC by Grayscale with less than 20 billion. No other Bitcoin ETF in the world individually exceeds 5 billion dollars in AUM.
Why volumes are important in choosing a Bitcoin ETF
One of the best parameters for evaluating an ETF is the average daily trading volume, because the higher it is, the more it suggests that its market is liquid.
IBIT often exceeds 2 billion dollars in daily trading volume, with the average recently hovering around 3 billion.
FBTC instead rarely exceeds 400 million, with an average that lately is below 300. Therefore, IBIT turns out to be much more liquid than FBTC.
GBTC even exceeds 300 million very rarely, and its average is well below 200.
In terms of daily trading volumes, IBIT by BlackRock is truly on another level compared to the others.
The costs
In reality, when choosing an ETF to invest in, one of the most important things to analyze, besides the level of liquidity in its market, are the costs.
In fact, there is always a cost, due both to any fees on trades and also to the cost of custody of the underlying.
From this point of view, IBIT is not the best, with its 0.25% fee.
There are indeed some ETFs that have fees of only 0.15%, even though the vast majority have them above 0.25%.
The problem, however, is that, except for the WisdomTree Physical Bitcoin British, all Bitcoin ETPs with fees lower than 0.25% have a decidedly low AUM, with really reduced trading volumes. This could be a problem when, for example, one decides to sell everything quickly.
Therefore, although IBIT by BlackRock is not the Bitcoin ETF with the lowest fees, it still remains the one with the lowest fees among the main bull and bear ETFs on BTC spot.
Always at the 0.25% fee, there is also the CoinShares Physical Bitcoin ETP European (BITC), which should be available on the exchanges of the old continent.
BITC has an AUM below 2 billion dollars, but it has trading volumes often below 20 million dollars, which is relatively low.
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The custody
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Probably, however, the most important characteristic of all is the level of security of the custody of BTC.
Although this should be the first parameter to analyze, it must be said that all the main spot Bitcoin ETFs have a good level of security for the custody of BTC, because they rely on institutional-level custodians.
Therefore, even though this is the very first parameter to evaluate, there isn’t an ETF that stands out above the others in this ranking, and in fact, the main ones are all more or less on the same level.
