The Best Bitcoin ETF to Buy Before $150k
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After years of delays and hemming and hawing from the SEC, along with the rejection of 30 separate applications for bitcoin ETFs… American investors can now invest directly in bitcoin from their brokerage account, via funds that hold actual bitcoin on their balance sheet.
This is huge news and an even bigger opportunity, for reasons I covered last week. And clearly, major Wall Street institutions agree.
Eleven separate ETFs became available for trading on Thursday morning. All of them promise to give everyday investors exposure to the best-performing asset of all time in an ordinary brokerage account.
And if you’re not willing to buy and hold bitcoin yourself… I think you should take advantage of them. Because bitcoin prices will, in my opinion, likely rise to $150,000 over the next year.
But there’s a problem we still have to solve…
Eleven ETFs are suddenly competing for your hard-earned dollars. ELEVEN!
I don’t know of any other asset that has this many ETFs with the exact same objective. It’s an absolute digital gold rush.
Figuring out which one is best for your portfolio sounds like a preamble to a wholly justified Advil-and-espresso cocktail.
Of course, that’s what the TradeSmith team is here for: to minimize your financial headaches.
So today, let’s find out which of these ETFs is most deserving of your valuable capital…
The Two Factors Every Bitcoin ETF Buyer Must Know
When deciding on most ETFs, there’s really only one factor to consider: the fees. You always want to buy the most fee-efficient vehicle out there.But these aren’t any old ETFs. These are bitcoin ETFs. And even if bitcoin is now buyable in your brokerage account, it still has all the strange trappings that bitcoin has always had.
You don’t store bitcoin itself in a bank account, or even a brokerage account. You have to use a bitcoin wallet — which can be software, hardware, a string of characters on a piece of paper… or if you’re hardcore, a memorized string of characters in your brain.
If you’re using a digital wallet connected to the internet, the risk of losing your assets to theft — or even user error — is ever present.
That’s because transactions are irreversible — there’s no bitcoin support line where you can get someone to undo your mistake.
All this brings trust to the forefront. You have to trust that these institutions are going to do a better job than you at storing bitcoin safely, and that the convenience of buying an ETF is worth the risk… and the fees.
To be clear, the likelihood that these institutions will take care of their bitcoin is high. All of these ETFs boast high-security measures where they’re storing the bitcoin offline in a hardware wallet or a secure private key.
But there’s always a nonzero chance that someone, somewhere, will make a big whoopsie and turn the whole fund upside down. That is the unique risk you take buying these ETFs, and it’s an essential consideration to make.
With all this in mind in mind, we can quickly whittle out a lot of the analysis work. Today we’ll focus on the ETFs with the highest assets under management (AUM)… charging the lowest fees of the bunch… and the highest credibility.
- Grayscale Bitcoin Trust (GBTC): GBTC is the largest bitcoin investment vehicle in the market, at $28.5 billion AUM. It’s certainly enjoyed a first-mover advantage, as this fund has been around since May 2015. Those two factors alone are a huge mark of credibility worth mentioning.
I covered GBTC in my recent essay, noting that it was distinctly a trust and not an ETF — which brought with it some unusual mechanisms regarding premiums or discounts to net asset value. However, on Thursday it was officially converted to an ETF and this characteristic no longer applies.
But with GBTC, you’re paying a high fee for the pedigree. It charges 1.50% in annual fees — very steep compared to the other options (at least for now).
Overall, GBTC is a likely safe and credible, but very fee-inefficient, pick. - iShares Bitcoin Trust (IBIT): IBIT is one of the newly listed ETFs, under BlackRock’s iShares brand, and it’s massively undercutting its fees to compete with the titan Grayscale ETF.
Currently the fund charges 0.12% in fees, which will last for the first 12 months or until the fund reaches $5 billion in assets under management. At writing, it sits at just $10.4 million in AUM. After that, the fee will rise to 0.25% for anyone who’s invested before or after. And you’ll notice that many different ETFs are using this scheme to attract initial investment.
IBIT is another good option to buy now, especially with its significantly discounted fee structure compared to GBTC and its prominent institutional backing from BlackRock. - ARK 21Shares Bitcoin ETF (ARKB): ARKB comes from ARK Invest, the growth-focused money management firm helmed by Cathie Wood.
ARKB is setting itself apart from other options by charging 0% in fees for the first six months or until it reaches $1 billion in AUM, with its normal 0.21% management fee waived during that period. Afterwards, the 0.21% annual fee will apply as normal.
That makes ARKB almost the most fee-efficient vehicle to own not just right now, but also for the foreseeable future. But one ETF beats it by a hair. - Bitwise Bitcoin ETF (BITB): Of all the bitcoin ETFs to launch last week, BITB is one of the cheapest.
Similar to ARKB, BITB is charging zero fees for the first six months or until AUM reaches $1 billion. After that, BITB will charge 0.20%, undercutting ARKB by a whopping single basis point. That makes it the cheapest bitcoin ETF on the market.
Unless you plan to invest millions of dollars, this will likely make an indiscernible difference in your position. But keep in mind that Bitwise is a much newer institution, founded in 2017, making it one of the youngest ETF providers on this list. That means it doesn’t quite have the hard-hitting credibility as the ones above. - Franklin Bitcoin ETF (EZBC): The competition for your capital is heating up quickly.
After just one day of trading for the Franklin Bitcoin ETF (EZBC), manager Franklin Templeton announced it would drop its fee to 0.19%, undercutting Bitwise’s fee by yet another single basis point.
Again, margins at this level have very little effect outside of high-net-worth positions. But it’s worth noting that Franklin Templeton has a much longer history as a money manager than Bitwise, and it’s offering lower fees.
As for which I’d buy, it’d probably be ARKB for its relative lowest fee structure and high pedigree. ARK Invest is a high-tech focused firm, and I’d give them a slight edge on custodial trust compared to the cheapest option, BITB.
That is, until after the fee-free grace period. Once fees are established across all options, EZBC is currently the winner. But as just one day of trading has shown us, that may change.
Now, here’s a quick rundown of all the other funds available that don’t get the Salvatore Seal of Approval…
- Fidelity Wise Origin Bitcoin Trust (FBTC): Like some competitors, FBTC is waiving all fees until the end of July with no consideration towards AUM. After that, it’ll charge 0.25%. This is comparable to BlackRock’s ETF, though with a shorter fee-free grace period.
- Invesco Galaxy Bitcoin ETF (BTCO): BTCO will charge 0.39% in fees after the first six months or the first $5 billion in AUM, relatively high but certainly not the worst on this list.
- WisdomTree Bitcoin Fund (BTCW): BTCW will charge 0.30% in fees, waiving them for the first six months or until the first $1 billion in AUM.
- VanEck Bitcoin Trust (HODL): HODL is charging 0.25% in fees straight out of the gate, giving little incentive to buy it, unless for some silly reason you want one of the oldest bitcoin memes (Hold On for Dear Life) represented in your brokerage account.
VanEck is a trusted ETF and mutual fund manager, so that does count for something. - Valkyrie Bitcoin Fund (BRRR): BRRR will charge a fee of 0.25% after the first three months of 0% fees. This isn’t bad, but it is a shorter grace period than some other options.
Here again, the fund seems to be betting on novelty tickers attracting attention. (For context, that’s the popular “money printer go brrr” meme from the bitcoin community circa 2020.) - Hashdex Bitcoin ETF (DEFI): I have never heard of Hashdex, I doubt that you have, and it’s charging 0.90%. Next!
When it comes to buying and holding bitcoin as a speculation, it’s true that these are all cheaper than buying bitcoin itself from the most popular exchanges.
Coinbase charges much higher fees for the same kind of exposure… and a pretty bad price.
Going to Coinbase as I write, I get a 1.84% fee on a $1,000 order and an execution price roughly 1% higher than the current market price of bitcoin.
These are steep fees… if you only aim to buy and hold bitcoin as a speculation.
When you buy bitcoin itself, there’s a lot more you can do with it than you can with an ETF. You can send it to another bitcoin wallet… use it to interact with DeFi (decentralized finance, which I’m sure we’ll talk about in due time)… and a whole lot more.
I say this so you understand the pros and cons of these new investments. Bull or bear market, it’s always been true that a well-informed investor is a markedly more profitable investor.
Stay tuned to TradeSmith Daily for more on bitcoin as the new bull market continues.
To your health and wealth,
Michael Salvatore
Editor, TradeSmith Daily