Compare the best Bitcoin ETFs

By:

James Knight

James is a lead editor for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets. His ... read more.

Updated: Oct 12, 2022

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ETFs in an industry like crypto seemed utopic a few years ago but it’s now become a reality. This beginner’s guide explains everything all the basics about these ETFs so you know what they are and what are the best Bitcoin ETFs to buy in 2023 based on our experts’ opinion. From why there aren’t many of them yet, to what makes a good one, we answer all your key questions right here.

What are the top Bitcoin ETFs?

You can find the best BTC ETFs listed below. The movement to get Bitcoin more widely accepted is growing at speed so there are new ETFs you can use to invest in the most popular cryptocurrency in the world.

Compare the best platforms to trade Bitcoin ETFs

To get a Bitcoin ETF you should use one a proper ETF platform. These are some of the best platforms to start trading with, and they’re easy to use for beginners and experienced users alike. You can also use them to buy your own Bitcoin directly while you wait for ETFs to be approved.

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What is a Bitcoin ETF?

An ETF (exchange-traded fund) is an investment security that tracks the price of a market, index, or sector by owning the assets within it. It trades on the stock market so that you can buy shares in the ETF, and the price of the fund rises and falls based on the performance of the assets it owns.

For a Bitcoin ETF, that asset is either the Bitcoin cryptocurrency, or (more commonly at the moment) shares in companies that operate in the Bitcoin market. The big advantage compared to buying cryptocurrency directly is these funds are regulated so the investor has a lot more protection if anything were to happen to their money, and they’re professionally managed and assessed as well.

What should I look for in an exchange-traded fund?

There are a few things to consider, including whether you want a fund that owns Bitcoin directly or one with a more diverse portfolio of shares. Here are four of the most important factors to look out for:

Low maintenance fees

ETFs need very little maintenance and oversight so they shouldn’t charge very much in fees. While you should expect to pay some kind of annual charge it should be small (less than 1%), and check to make sure there aren’t lots of other hidden fees as well. Generally, you’re better off choosing a fund with the lowest fees as many of them hold the same assets and will have similar performance.

A history of good performance

Past performance is no guarantee of future success. But it can be a good indicator that the fund is on the right track. You want to steer clear of funds that have routinely underperformed expectations or the market as a whole. 

Daily trading volume

Lots of trading volume means there’s enough liquidity in the market. This is important because it means the ETF will always be able to trade the stocks it owns, and won’t get stuck with a failing investment because there isn’t enough demand if it wants to sell.

Diverse holdings

One of the main benefits of an ETF is that it gives you access to a diverse portfolio of assets. An ETF should reduce your risk by holding lots of different companies, rather than being reliant on the performance of one or two.

Obviously, in the case of a Bitcoin ETF your options are limited, but it’s why it could be worth picking one that owns shares in a few different companies as well as the coin itself. Each ETF has to publish its holdings, so you can see what percentage of its portfolio is in each asset and make a decision accordingly.

Quick answers to key questions

Do I have to pay to use an ETF?

You will usually have to pay some form of maintenance or management fee, but it shouldn’t be very much. Some funds charge less than 0.1% a year, for others it’s a little bit higher but you should be wary of anything above 1%.

What’s the difference between an ETF and a mutual fund?

An ETF is passive and tracks the performance of an index or industry, while a mutual fund is controlled by a professional investor who decides what to buy and sell. Mutual funds might have a guiding principle but you’re still reliant on the vagaries of decision-making, and their performance can vary quite dramatically. With an ETF you can be confident it is going to accurately reflect the state of the industry it’s tracking.

Can ETFs hold other coins as well as Bitcoin? 

In theory, yes, as once they are given regulatory approval to own Bitcoin the principle would apply to all other cryptocurrencies as well. Until then, you could look for an ETF that owns shares in companies that operate in different crypto markets, such as Ethereum, along with Bitcoin.

Are Bitcoin ETFs safe to use?

Yes, they are just as safe as any stock or ETF that you can buy through a stock broker. In fact, a Bitcoin ETF is a lot more secure than owning Bitcoin itself, and the whole point of the regulation is to protect investors. Just remember to make sure your broker is regulated by an established financial body such as the SEC or FCA so that you have the benefits of that protection.

When will more Bitcoin ETFs be approved by the SEC?

It’s difficult to tell, as the SEC has continually delayed approving cryptocurrency ETFs so far. However, as more banks and financial institutions start to own Bitcoin it makes it more likely that the approval will come in the next few months.

Should I use a Bitcoin ETF?

It depends on what you think of the few that are available at the moment. As a general rule, ETFs are an excellent choice for beginners, as they’re easy to get your hands on and can be left to their own devices. For now, though, there aren’t very many options available and it might be easier to learn how to buy Bitcoin directly if you want to gain exposure to it.

Still undecided?

To help you come to a final decision, we’ve summarised all the key points you need to know about in the table below. Have a think about these pros and cons, then you’ll be well set to decide whether an ETF is for you.

Where do I go now?

If you want to go ahead and get an ETF now then you should pick a broker to get started. Otherwise, you can use one of our investing courses to learn more about Bitcoin or the stock market.