What if you could invest in Bitcoin without the hassle of securing a wallet? Or dealing with the technical details of buying and storing Bitcoin? A Bitcoin ETF allows you to do just that. Bitcoin ETF stands for Bitcoin exchange-traded fund. This investment product tracks the performance of Bitcoin, allowing you to buy shares of the ETF on traditional exchanges, just like stocks. If you're wondering how to buy Bitcoin ETF, this guide will walk you through the process and its benefits. In no time, you’ll learn how to easily invest in Bitcoin ETFs, minimizing risks and effort while achieving good BItcoin annual returns.
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Why Invest in a Spot Bitcoin ETF Instead of Bitcoin Directly?
A Bitcoin ETF is a fund that tracks the price of Bitcoin. Instead of buying, selling, and storing Bitcoins directly, investors can trade a Bitcoin ETF that reflects the price as it goes up or down in value.
These ETFs are traded on the major stock exchanges, giving investors the liquidity and ease of access they need to enter and exit a Bitcoin-related investment without going through the hassle of trading Bitcoin itself.
There are two main types of Bitcoin ETFs:
Spot Bitcoin ETFs
These more recently introduced ETFs hold actual Bitcoin as the underlying asset. The fund buys Bitcoin and stores it securely, and the ETF’s value fluctuates with the market price of Bitcoin.
Different spot Bitcoin funds may calculate the price of Bitcoin slightly differently depending on their methodology, creating differences in pricing between ETFs. Currently, 12 spot Bitcoin ETFs are available to invest in, representing more than $54 billion in asset value.
Futures-based Bitcoin ETFs
These ETFs, which have been around for some time, invest in futures contracts for Bitcoin instead of holding Bitcoin. Unlike spot Bitcoin ETFs that are passively managed, a futures-based Bitcoin ETF is typically actively managed, which can increase fees. There are 22 futures-based Bitcoin ETFs to invest in, with a collective asset value of over $4 billion.
The Challenges of Direct Bitcoin Ownership
Investing in Bitcoin directly takes more work than investing in stocks or funds. Managing Bitcoin directly involves:
- Owning a digital wallet to store BTC, requiring a certain level of technological understanding.
- Securing your Bitcoin and related passwords to keep it safe from hackers.
- Managing your Bitcoin using an exchange separate from your main brokerage account.
A Bitcoin ETF removes this complexity by allowing you to invest in Bitcoin through a publicly traded fund. This fund can be bought and sold through your brokerage account, making it simple to track and trade.
Think of a Bitcoin ETF as similar to a gold ETF. Instead of buying and storing Bitcoin or gold bars, an ETF exposes you to the asset directly from your brokerage account; no safety is required.
The Benefits of Spot Bitcoin ETFs
Investing in a Bitcoin ETF has benefits and drawbacks compared to investing directly in Bitcoin. The benefits of investing in a Bitcoin ETF vs. Bitcoin directly include:
Easier Access
You can invest in a Bitcoin ETF from your brokerage account without worrying about BTC exchanges or wallets.
Greater Security
You outsource security to the ETF manager, who can leverage institutional-grade security to protect the Bitcoin.
More Protection
A Bitcoin ETF has the same level of regulatory scrutiny as other securities traded on a stock market, which can provide more confidence when compared to the largely unregulated BTC market.
While Bitcoin ETFs are not FDIC-insured, Securities Investor Protection Corporation (SIPC) insurance protects against a customer's loss of cash and securities at a financially troubled SIPC-member brokerage firm up to $500,000. SIPC does not protect against the decline in the value of your securities. Learn more about what SIPC protects and doesn’t protect.
The Drawbacks of Spot Bitcoin ETFs
The drawbacks of a Bitcoin ETF include:
Higher Fees
A Bitcoin ETF charges a management fee, which can erode your returns compared to owning Bitcoin directly. Some brokerages don’t charge to trade a Bitcoin ETF, while a trading platform may charge a commission for each transaction, so you’ll want to calculate the fees and commissions for each option to know the actual cost.
Tracking Error
Depending on how the ETF calculates the price of Bitcoin, there can sometimes be a difference between the actual cost and the ETF's price. There can also be a difference between the performance of the fund and the performance of Bitcoin itself.
Regulatory Risk
Investors should expect regulations to evolve, which may impact how these ETFs are taxed and managed.
Limited Track Record
While futures-based Bitcoin ETFs have been around since 2021, spot Bitcoin ETFs were only approved in January 2024. The limited time these ETFs have existed can make it hard for investors to evaluate their performance or anticipate how they will react in a major market event.
Comparing your Bitcoin Investment Options
|
Investment Options |
Benefits |
Disadvantages |
|
Owning Bitcoin directly |
|
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|
Spot Bitcoin ETFs |
|
|
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Futures-based Bitcoin ETFs |
|
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Where & How to Buy Bitcoin ETF (ETF) Guide
Following the SEC's recent approval of spot Bitcoin ETFs, investing in Bitcoin is now more accessible to average investors eager to get into the Bitcoin space. For investors and traders, buying a spot Bitcoin ETF is like buying shares in any other ETF or security.
Spot Bitcoin ETFs are available on various traditional platforms that offer popular services, like:
- Stock and options trading
- Retirement planning
- Advisory services
- Automated investing
Leveraging ETFs for Indirect Investment
Tradeable on conventional exchanges like the New York Stock Exchange and Nasdaq, these ETFs allow investors to enjoy the leverage of investing in Bitcoin without a need to hold it or understand how Bitcoin platforms work. Before investing, you should know how these ETFs work and the risks involved.
How to Buy a Bitcoin ETF
Buying a Bitcoin ETF is similar to purchasing any other ETF. Here’s how the process works:
Open a Brokerage Account
Select a company that offers Bitcoin ETFs and open an online brokerage account.
Fund the Account
Many brokerage platforms allow you to fund your account from other brokerage platforms or a regular bank account. Ensure you fund the account with adequate money to cover the cost of your ETF shares, additional fees, and commissions.
Research Available Bitcoin ETFs
There are currently 11 Bitcoin ETFs approved by the SEC. During your research, look for ETFs with a high trading volume and assets under management (AUM). Also, look into what other assets comprise the ETF and check if the issuer behind it is reputable.
Select Preferred Bitcoin ETFs
Many brokerages give you at least two or three options, displaying the difference in fees for each offer. Choose a Bitcoin ETF that aligns with your budget and investment goals.
Place an Order
Place a buy order for your selected Bitcoin ETF, as you would for stocks. You can choose between a market order, which buys the ETF in minutes, or a limit order, which will execute at your pre-set price.
Monitor Your Investments Regularly
Keep an eye on your investment, observe Bitcoin charts, and watch out for any Bitcoin-related news, as this can often affect the volatility of your spot Bitcoin ETF.
Where to Buy Bitcoin ETFs
Bitcoin ETFs are now available to trade on several online brokerage platforms and robo-advisors. New ETFs are also eligible for use in many retirement accounts, like Bitcoin IRAs, traditional IRAs and Roth IRA accounts, and solo 401(k) plans. When picking Bitcoin ETFs, investors must analyze fees.
Navigating ETF Costs for Bitcoin Exposure
For now, some issuers are offering fee waivers to encourage investments. For example, VanEck Bitcoin ETF (HODL) is waiving its sponsor fees until March 31, 2025, or until it hits $1.5 billion in Assets Under Management (AUM). High management fees, like the one charged by Grayscale (1.50%), can cut into your ETF profits. Investors should aim for funds with annual management fees between 0.2% and 0.5%.
The Best Bitcoin ETFs in 2025
|
Fund (Ticker) |
Total Assets |
3-Month Performance |
Expense Ratio |
|
IShares Bitcoin Trust (IBIT) |
$52.1 billion |
57.61% |
0.12% |
|
Grayscale Bitcoin Trust (GBTC) |
$19.3 billion |
57.19% |
1.50% |
|
Fidelity Wise Origin Bitcoin Fund (FBTC) |
$19 billion |
57.61% |
0% |
|
ARK 21Shares Bitcoin ETF (ARKB) |
$4.41 billion |
57.68% |
0.21% |
|
Bitwise Bitcoin ETF Trust (BITB) |
$3.8 billion |
57.55% |
0.20% |
|
Grayscale Bitcoin Mini Trust (BTC) |
$3.6 billion |
57.52% |
0.15% |
|
ProShares Bitcoin ETF (BITO) |
$2.4 billion |
54.63% |
0.95% |
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