Best Bitcoin ETFs to Buy in Canada: Top Picks for 2023

As the popularity of Bitcoin continues to rise, many Canadian investors are looking for ways to gain exposure to this digital asset. One of the most convenient and regulated methods to invest in Bitcoin is through Exchange-Traded Funds (ETFs). Bitcoin ETFs offer a way to invest in the cryptocurrency without the need to manage the complexities of owning and securing the digital asset directly.

In Canada, several Bitcoin ETFs have gained traction among investors, each offering unique benefits and risks. Here are some of the best Bitcoin ETFs to consider in 2023:

1. Purpose Bitcoin ETF (BTCC):
The Purpose Bitcoin ETF, launched in February 2021, was the first Bitcoin ETF in the world and has since become one of the most popular options in Canada. BTCC offers direct exposure to Bitcoin by holding nearly 100% of its assets in the cryptocurrency itself. This ETF is available in both Canadian dollar (CAD) and U.S. dollar (USD) versions, giving investors flexibility in their currency choice. Additionally, BTCC offers a low management fee compared to other ETFs, making it a cost-effective option for those looking to invest in Bitcoin.

2. CI Galaxy Bitcoin ETF (BTCX):
The CI Galaxy Bitcoin ETF is another strong contender in the Canadian market. BTCX provides exposure to Bitcoin by holding physical Bitcoin in cold storage, ensuring high levels of security for its assets. One of the key advantages of BTCX is its competitive management fee, which is slightly lower than that of the Purpose Bitcoin ETF. This makes it an attractive option for cost-conscious investors who still want to gain direct exposure to Bitcoin.

3. Evolve Bitcoin ETF (EBIT):
Evolve Bitcoin ETF is known for its innovation in the ETF space. EBIT offers investors exposure to daily price movements of Bitcoin in CAD, and it also provides a unique feature called the "Ether ETF," which offers exposure to Ethereum (ETH), another popular cryptocurrency. This dual exposure makes EBIT an appealing choice for investors who are interested in diversifying their cryptocurrency investments within a single ETF. Additionally, EBIT offers both unhedged and CAD-hedged units, giving investors more control over their currency exposure.

4. Horizons Bitcoin ETF (HBIT):
Horizons Bitcoin ETF takes a different approach by offering exposure to Bitcoin through futures contracts rather than directly holding the cryptocurrency. HBIT is designed to provide returns that correspond to the performance of Bitcoin, minus fees, through the use of futures contracts. This structure can be beneficial for investors who prefer not to hold the physical asset or are looking for a way to speculate on Bitcoin's price movements without directly owning it. However, it’s important to note that investing in futures-based ETFs can come with higher volatility and risks.

Factors to Consider When Choosing a Bitcoin ETF:

When selecting the best Bitcoin ETF for your portfolio, there are several factors to consider:

1. Management Fees:
The management fee is a crucial consideration, as it directly impacts your returns. Bitcoin ETFs typically charge a management fee to cover the costs of managing the fund, and these fees can vary between ETFs. Lower fees are generally more favorable, but it's important to weigh the cost against the ETF's performance and other benefits.

2. Currency Exposure:
Many Bitcoin ETFs in Canada offer both CAD and USD versions, which can be beneficial depending on your investment goals and currency preferences. If you want to avoid currency risk, choosing an ETF in your preferred currency is advisable.

3. Security and Storage:
Given the nature of Bitcoin, security is a top priority. Some ETFs, like the CI Galaxy Bitcoin ETF, emphasize the importance of cold storage, which is considered one of the safest ways to store digital assets. Understanding how an ETF secures its Bitcoin holdings can help you make an informed decision.

4. Type of Exposure:
Bitcoin ETFs can offer direct exposure by holding physical Bitcoin or indirect exposure through futures contracts. Depending on your investment strategy, one type may be more suitable than the other. Direct exposure is typically preferred by long-term investors, while futures-based ETFs might appeal to those looking to capitalize on short-term price movements.

5. Liquidity:
Liquidity is another important factor, especially for investors who may need to buy or sell their shares quickly. More popular ETFs, such as the Purpose Bitcoin ETF, tend to have higher liquidity, which can result in tighter spreads and lower trading costs.

6. Tax Considerations:
Lastly, consider the tax implications of investing in a Bitcoin ETF. In Canada, capital gains tax applies to profits from the sale of ETF shares. Understanding the tax treatment of your investment can help you plan your strategy more effectively.

Conclusion:

Investing in a Bitcoin ETF is a convenient and regulated way to gain exposure to the growing world of cryptocurrency. In Canada, several Bitcoin ETFs offer unique benefits, from direct exposure to Bitcoin's price movements to diversified options that include other cryptocurrencies like Ethereum. As always, it's important to carefully consider your investment goals, risk tolerance, and the specific features of each ETF before making a decision. By doing so, you can select the best Bitcoin ETF to align with your financial strategy and maximize your potential returns in 2023 and beyond.