Expense Ratios for Spot Bitcoin ETFs

If you have read any news about crypto in the past several months, you have likely heard about spot Bitcoin exchange-traded funds (ETFs). These ETFs will allow investors to gain exposure to Bitcoin through an equity product. 

There are many options for different spot Bitcoin ETFs. With over ten ETFs approved, there is a choice that each investor has to make in terms of which ETF to invest in. While most of these ETFs will likely track  Bitcoin in a similar way, one point of differentiation that can be found is in the expense ratios.

Spot Bitcoin ETFs With Low Expense Ratios

The expense ratio is the cost of managing the ETF. It is the ratio of the fees that management takes divided by the amount of assets owned by the fund. This ratio is important because it negatively impacts the amount you can earn from investing in the fund.

This issue is particularly important for Bitcoin ETFs because of their novelty and complexity. This makes for more work for the management companies, so the expense ratios are usually higher than other ETFs. 

There are two major Bitcoin ETFs: the ProShares Bitcoin Strategy ETF (BITO) and the Grayscale Bitcoin Trust (GBTC). These ETFs use Bitcoin Futures to closely track the price of Bitcoin. Because the futures contracts must be actively managed and rolled over, the expense ratios are somewhat high. BITO has an expense ratio of 0.95%, and GBTC has an expense ratio of 2%. These expense ratios are still on the lower end for Bitcoin ETFs.

BlackRock Bitcoin ETF: All You Need to Know

In June 2023, BlackRock announced that it applied for a spot Bitcoin ETF. Within a week, the price of Bitcoin shot up more than 5%. This is because BlackRock is the largest asset manager in the world, and it runs the heralded iShares.

Since the June announcement, BlackRock has been in continuous talks with the Securities and Exchange Commission (SEC), meeting multiple times to discuss specific aspects of the ETF and make amendments to the application. One of the amendments allows for banks to create new shares of the ETF with cash. This is important because it allows banks to invest in cryptocurrency, even if regulation makes it so that they cannot hold crypto directly.

In October, Black Rock received $100,000 in seed funding from an unknown investor. 

Bitcoin Futures ETFs vs. Spot Bitcoin ETF Fees

As mentioned above, BITO has an expense ratio of 0.95%, and GBTC has an expense ratio of 2%. However, the more pressing question revolves around the expense ratios for the spot Bitcoin ETFs.

ARK Invest and 21Shares were the first to announce their expense ratio for their Bitcoin ETF, ARKB. They indicated the ETF would have an expense ratio of 0.25%.

Here are the expense ratios for the other spot Bitcoin ETFs:

• Grayscale (GBTC): 1.5%
• BlackRock (IBIT): 0.3%
• Bitwise (BITB): 0.24%
• VanEck (HODL): 0.25%
• WisdomTree (BTCW): 0.5%
• Invesco & Galaxy (BTCO): 0.59%
• Fidelity Advantage Bitcoin (FBTC): 0.39%
• Valkyrie (BRRR): 0.8%
• Hashdex Bitcoin Futures (DEFI): 0.9%
• Franklin (EZBC): 0.29%

Several of the filings also offer lower fees for the first users. For example, ARK and 21Shares have no fees for the first $1 billion of transactions. 

How to Invest In Bitcoin With Low Fees 

If you are looking to invest in Bitcoin with low fees there are three primary ways to do so. 

Use a Cryptocurrency Exchange

One way is to invest in Bitcoin through a crypto trading platform. These exchanges are the owners of the Bitcoin, while you receive access to the price fluctuations for a small fee. Kraken and eToro are recommended for their low fees. Kraken charges fees between 0.1% and 0.26% per transaction. eToro charges a flat 1% fee.

Invest in Grayscale Bitcoin Trust

If you want to invest in Bitcoin on an equity brokerage, then the Grayscale Bitcoin Trust (GBTC) is a good option. This ETF uses Bitcoin futures to closely track the price of Bitcoin. You can invest with most brokerages, such as Robinhood Markets Inc. or Interactive Brokers. The expense ratio is 2%. 

Invest in Spot Bitcoin ETFs

Spot Bitcoin ETFs were approved in early 2024. These ETFs are available for trading on most equity brokerages. 

Bitcoin ETFs vs. Investing in Bitcoin

Bitcoin ETFs do not allow you to own the underlying asset. They simply allow you to own shares in a fund that controls and has discretion over the assets. Investing in a Bitcoin ETF exposes you to the price fluctuations of Bitcoin, not the benefits that come from direct ownership of Bitcoins.

If you invest in Bitcoin directly through a wallet, you are exposed to the same price fluctuations of Bitcoin that come with the ETF,  but you also have direct ownership over the Bitcoins, you can use them on the blockchain for several use cases, ranging from payments to staking.

Another distinction comes from where you can access the different investments. Bitcoin ETFs can be accessed from any standard brokerage such as Robinhood or Interactive Brokers. It is an equity product, so it can be traded in most places where you can buy and sell equities. Bitcoin, on the other hand, can be purchased through a crypto trading platform or with a wallet. 

Frequently Asked Questions