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January 11, 2024 at 01:55 PM
What You Need to Know
- The SEC just approved 11 applications for spot bitcoin ETFs to begin trading Thursday.
- While it’s likely that these new ETFs will have an impact on the price of bitcoin in the near term, the longer-term impact remains to be seen.
- The ability to invest directly in bitcoin through an ETF will open the door to clients and advisors who may have been reluctant to invest in the past.
The Securities and Exchange Commission on Wednesday approved the applications for 11 spot bitcoin ETFs to commence trading Thursday.
Previously available bitcoin ETFs, like the ProShares Bitcoin Strategy ETF (BITO), invested in bitcoin futures contracts. The 11 new ETFs invest directly in bitcoin, allowing investors more direct exposure to the cryptocurrency’s gains and losses.
The new simplicity of investing in bitcoin opens a door to clients, and advisors, who may have been hesitant to do so in the past. Ric Edelman, the leader of the Digital Assets Council of Financial Professionals, predicts that $150 billion will flow into spot bitcoin ETFs from independent RIAs alone.
Here’s what to know about these new ETFs, their fees, and how to talk to your clients about them.
The New Spot Bitcoin ETFs and Their Fees
The fees for these 11 spot bitcoin ETFs range from 20 basis points to 150 basis points. Seven of the funds have temporarily waived or lowered their fees in a battle to attract assets. Here is a table showing the expenses and any fee waivers for all 11 of the new ETFs:
| ETF Name | Ticker | Fees | Fees with waiver | Waiver period/asset limits |
| Bitwise Bitcoin ETF | BITB | 0.20% | 0.00% | Six months or $1 billion |
| ARK 21Shares Bitcoin ETF | ARKB | 0,21% | 0.00% | Six months or $1 billion |
| Fidelity Wise Origin Bitcoin Fund | FBTC | 0.25% | 0.00% | Through July 21 |
| iShares Bitcoin Trust | IBIT | 0.25% | 0.12% | 12 months or $5 billion |
| VanEck Bitcoin Trust | HODL | 0.25% | No waiver | NA |
| Franklin Bitcoin ETF | EZBC | 0.29% | No waiver | NA |
| WisdomTree Bitcoin Fund | BTCW | 0.30% | 0.00% | Six months or $1 billion |
| Invesco Galaxy Bitcoin ETF | BTCO | 0.39% | 0.00% | Six months or $5 billion |
| Valkyrie Bitcoin Fund | BRRR | 0.49% | 0.00% | Three months |
| Hashdex Bitcoin ETF | DEFI | 0.94% | No waiver | NA |
| Grayscale Bitcoin Trust | GBTC | 1.50% | No waiver | NA |
Source: Morningstar
Bitcoin Price Outlook
It is likely that we will see a lot of investor interest in these ETFs. The price of bitcoin has risen more than 160% in the past year, and an influx of ETF buyers could certainly drive the price even higher. The price surged 5.6% in the first 30 minutes of trading Thursday morning before declining later in the day. Of course, initial reactions to a new product do not always indicate the direction of the price in the longer term.
One factor at play: Spot bitcoin ETFs enable investors to trade bitcoin with the ease of buying and selling any other ETF. As the supply of bitcoin is finite, the increased demand could dramatically drive up the price of bitcoin. This could lead to some investors selling to realize profits which could impact the price volatility of bitcoin and impact holders of these ETFs.
An analogous situation is the emergence of ETFs that hold physical gold. One such fund is the SPDR Gold Shares ETF (GLD). The advent of this and similar ETFs has not upset the gold market. While bitcoin is certainly more volatile than gold, these ETFs might serve as a bit of an indicator.
One question that has been raised in the media is whether these spot bitcoin ETFs will trade at a premium, or perhaps at a discount, to their net asset value. Opinions are divided as many analysts view the underlying Bitcoin market as liquid and efficient.
