Best ETF for Bitcoin: A Comprehensive Guide for 2024 and Beyond

Imagine having a way to invest in Bitcoin without actually buying or holding the cryptocurrency yourself. That's where Bitcoin ETFs (Exchange-Traded Funds) come into play, offering investors a more accessible and regulated entry point into the world of Bitcoin. The rise of Bitcoin ETFs has significantly transformed how both retail and institutional investors can gain exposure to Bitcoin, reducing the complexities and risks of direct ownership. But the question remains: Which ETF is the best for Bitcoin in 2024?

The Race for the Best Bitcoin ETF

In 2024, the competition for the title of the best Bitcoin ETF is fierce. Several key players dominate the market, each offering a unique combination of benefits like fees, market exposure, and overall performance. Choosing the right one depends on your specific investment goals, risk tolerance, and whether you're more interested in direct Bitcoin exposure or companies involved in Bitcoin-related activities.

ProShares Bitcoin Strategy ETF (BITO)

One of the top contenders is ProShares Bitcoin Strategy ETF (BITO), the first U.S. Bitcoin-linked ETF to receive approval from the Securities and Exchange Commission (SEC) back in October 2021. Rather than investing directly in Bitcoin, BITO tracks Bitcoin futures, providing investors exposure to Bitcoin price movements without the complications of owning the digital asset itself. While BITO doesn’t directly hold Bitcoin, it has grown in popularity for its ability to offer exposure in a more regulated and liquid form. This ETF is an excellent option for conservative investors looking for exposure to Bitcoin while avoiding direct ownership risks, such as wallet management or security issues.

Advantages of BITO:

• Regulatory approval from the SEC.
• Access to Bitcoin’s price movements without owning the asset.
• More liquidity than direct Bitcoin ownership.
• Lower risk associated with Bitcoin storage and theft.

Disadvantages of BITO:

• Futures-based exposure can lead to tracking errors.
• Higher fees compared to some of the other ETFs.

Grayscale Bitcoin Trust (GBTC)

For investors willing to take on a bit more risk, Grayscale Bitcoin Trust (GBTC) is another prominent name in the space. Unlike BITO, GBTC directly holds Bitcoin, offering more pure exposure to the asset’s price. However, it operates as a trust rather than a typical ETF, leading to differences in structure and liquidity. GBTC has been seeking conversion to a spot Bitcoin ETF, a move that would make it more appealing to institutional investors and possibly increase its liquidity and efficiency. GBTC’s shares have traded at a significant discount to its underlying Bitcoin holdings, but that discount can be seen as an opportunity if the ETF conversion is approved.

Advantages of GBTC:

• Direct exposure to Bitcoin.
• A discounted share price relative to Bitcoin’s value.
• Higher upside potential if converted to a spot ETF.

Disadvantages of GBTC:

• Lack of liquidity compared to traditional ETFs.
• Premiums and discounts to the net asset value (NAV) can add risk.
• High management fees compared to some other options.

VanEck Bitcoin Strategy ETF (XBTF)

VanEck Bitcoin Strategy ETF (XBTF) is another strong competitor, launched as a futures-based ETF after BITO. XBTF appeals to investors looking for tax efficiency, as it is structured as a C-corporation. This ETF aims to provide better after-tax returns compared to competitors, making it ideal for long-term investors looking for lower tax liability. Though smaller in size compared to BITO, XBTF is a solid choice for those who prioritize tax efficiency.

Advantages of XBTF:

• Tax-efficient structure.
• Low expense ratio compared to other Bitcoin futures ETFs.
• Institutional credibility with VanEck’s long history in the ETF market.

Disadvantages of XBTF:

• Futures-based exposure can cause tracking issues.
• Lower liquidity compared to BITO.

Valkyrie Bitcoin Strategy ETF (BTF)

Another noteworthy option is the Valkyrie Bitcoin Strategy ETF (BTF). Valkyrie’s ETF also provides exposure to Bitcoin through futures contracts rather than holding the cryptocurrency directly. BTF has gained traction due to its relatively low fees and straightforward approach to gaining Bitcoin exposure. It’s an attractive option for investors who want futures exposure but are concerned about minimizing costs.

Advantages of BTF:

• Lower fees than competitors.
• Futures-based exposure for Bitcoin price movements.
• Simple structure for easy Bitcoin exposure.

Disadvantages of BTF:

• Futures contracts could lead to tracking discrepancies.
• Less market presence than BITO or GBTC.

The Emergence of Spot Bitcoin ETFs

As of 2024, there has been intense speculation and anticipation around the approval of a spot Bitcoin ETF in the U.S., which would allow direct exposure to Bitcoin’s price rather than through futures contracts. Several companies, including Grayscale, are pushing for approval, and if a spot ETF becomes available, it could dramatically shift the landscape of Bitcoin ETFs.

A spot Bitcoin ETF would likely outperform the futures-based ETFs because it would track Bitcoin’s price directly, eliminating many of the tracking issues present in futures-based funds. Investors would benefit from lower costs, more accurate pricing, and greater overall transparency. However, regulatory hurdles remain, and it’s uncertain when such a product will become available.

Bitcoin ETFs vs. Holding Bitcoin

A key question many investors face is whether to invest in Bitcoin directly or through an ETF. Each option has its own set of pros and cons. While holding Bitcoin offers full ownership and control, it comes with risks such as wallet security, regulatory uncertainty, and tax implications. On the other hand, Bitcoin ETFs provide easier access, regulatory protections, and the potential for tax efficiency, but they often come with management fees and tracking issues.

Comparison	Bitcoin Ownership	Bitcoin ETF
Accessibility	Requires wallet setup	Available via stock exchanges
Risk	High (hacks, theft)	Lower (regulated environment)
Fees	Low	Management fees
Price tracking	Exact	Can deviate (futures-based)
Tax Efficiency	Dependent on jurisdiction	Can be optimized (e.g., XBTF)

Conclusion: Which ETF is Best for Bitcoin?

Ultimately, the best Bitcoin ETF for you depends on your investment strategy. If you prefer a more conservative approach and want to avoid direct exposure to Bitcoin’s price volatility, BITO or XBTF are excellent choices. BITO offers liquidity and regulatory approval, while XBTF provides tax efficiency for long-term investors.

For those willing to take on more risk for potentially higher rewards, GBTC is worth considering, especially with the potential conversion to a spot ETF. If you’re focused on low fees, BTF may be your best option.

As we look forward to the potential launch of a spot Bitcoin ETF, it’s essential to keep an eye on regulatory developments. A spot ETF would likely revolutionize Bitcoin investing and offer the best exposure yet. Until then, the current Bitcoin ETFs available provide a range of options for investors at all levels.

Whether you choose to invest in BITO, GBTC, XBTF, or BTF, each offers a unique way to gain exposure to Bitcoin’s price movements. The key is to assess your own risk tolerance, investment horizon, and tax considerations before making a decision.

Bitcoin ETFs are here to stay, and as the market evolves, staying informed will help you capitalize on the best opportunities.