Spot Bitcoin ETFs have delivered strong performance this year, supported by Bitcoin's impressive price surge. Recently, Bitcoin broke out decisively, reaching a three-year high above $64,000. Many analysts predict it is only a matter of time before the cryptocurrency surpasses its previous all-time high of $69,000.
Understanding Bitcoin and Bitcoin ETFs
Many investors prefer holding Bitcoin directly as the most straightforward method of gaining crypto exposure. This approach avoids recurring fees—once you purchase Bitcoin and store it securely in a hot or cold wallet, there are no additional management expenses.
However, direct Bitcoin investment isn’t ideal for everyone. Institutional investors and many individuals favor the convenience and regulatory clarity of Bitcoin ETFs. These financial products simplify exposure without the technical challenges of self-custody.
Key Differences Between FBTC and IBIT
Two of the largest and most discussed spot Bitcoin ETFs are the iShares Bitcoin Trust (IBIT) and the Fidelity Wise Origin Bitcoin Fund (FBTC). While Grayscale Bitcoin Trust (GBTC) remains the largest fund by assets, its 1.5% expense ratio makes it a less attractive option for cost-conscious investors.
Both IBIT and FBTC track Bitcoin’s price and have shown nearly identical performance, each gaining over 32% since their launch in January 2024. The core differences lie in their expense structures and current asset sizes.
Expense Ratios and Fee Waivers
- FBTC: Fidelity charges a 0.25% expense ratio but has waived all fees until July 2024. It currently holds over $2.5 billion in assets.
- IBIT: iShares also charges 0.25% and does not offer a fee waiver. It is the larger of the two, with over $9.4 billion in assets under management.
This temporary fee waiver makes FBTC the more cost-efficient choice in the short term. After July, both funds will have identical expense ratios.
Liquidity and Trading Volume
IBIT’s larger asset base provides slightly higher liquidity, which can be beneficial for large-volume traders. However, both ETFs are highly liquid compared to smaller competitors like the Franklin Templeton or Bitwise Bitcoin ETFs.
For most retail investors, the difference in liquidity between IBIT and FBTC is negligible. Both trade on major exchanges with tight spreads and high daily volume.
Which Bitcoin ETF Is Right for You?
If you plan to invest before July 2024, FBTC’s fee waiver makes it the preferable choice. You’ll save on management costs while receiving the same Bitcoin price exposure.
After the waiver expires, both funds become virtually identical in cost and performance. Your decision might then come down to brand preference or existing brokerage relationships.
Smaller ETFs from firms like Franklin Templeton or Bitwise offer even lower fees but come with significantly lower liquidity. This can lead to wider bid-ask spreads, making them less ideal for active traders.
Regardless of your choice, always remember that investing in Bitcoin ETFs still carries the volatility and risks associated with Bitcoin itself. 👉 Compare real-time ETF performance data
Frequently Asked Questions
What is a spot Bitcoin ETF?
A spot Bitcoin ETF holds actual Bitcoin, allowing investors to gain price exposure without directly buying or storing the cryptocurrency. It trades on traditional stock exchanges like any other ETF.
How do FBTC and IBIT differ from Bitcoin futures ETFs?
Unlike futures-based ETFs like BITO, which derive value from Bitcoin futures contracts, spot ETFs like IBIT and FBTC hold physical Bitcoin. This often results in better tracking of the actual Bitcoin price.
Are Bitcoin ETFs safer than holding Bitcoin directly?
Bitcoin ETFs eliminate the need for private key management and storage, reducing self-custody risks. However, they introduce counterparty risk—your investment depends on the fund provider’s trustworthiness and regulatory compliance.
Can I trade these ETFs in a retirement account?
Yes, most major brokerages allow spot Bitcoin ETFs to be held in IRAs and other retirement accounts, providing a tax-advantaged way to gain crypto exposure.
What happens after Fidelity’s fee waiver ends?
After July 2024, FBTC will begin charging the same 0.25% fee as IBIT. The cost advantage of FBTC will disappear, making the two funds nearly equivalent in terms of expenses.
Do these ETFs pay dividends?
No. Bitcoin ETFs do not generate dividends or interest income. Returns are based solely on changes in the price of Bitcoin.