Cryptocurrency is back in the headlines, and the talking heads on TV are buzzing about Bitcoin again. Before their short attention spans focus on another topic, they’ll fulminate about the new spot Bitcoin ETFs being a game changer. Should investors get on board the trend, though?
Just to recap, the SEC finally relented and approved 11 spot Bitcoin ETFs, including ones from BlackRock, Grayscale, and Fidelity. These funds can closely track the movements of Bitcoin itself and don’t rely on derivatives such as Bitcoin futures or options.
There’s no denying that these funds will attract attention and capital into the cryptocurrency space. They’ll also add a sense of legitimacy for reluctant, traditionally-minded investors.
The hype is undeniable, with spot Bitcoin ETFs collectively surpassing $10 billion in trading volume within four days of their launch. So far, the Grayscale Bitcoin Trust ETF (GBTC) is the leader in terms of trading volume, but it had a head start as this fund already existed for years before being converted to an ETF.
Another major contender is the iShares Bitcoin Trust (IBIT), which is controlled by financial giant BlackRock. It’s well known that BlackRock CEO Larry Fink is a vocal champion of Bitcoin, so it’s not too surprising that BlackRock is moving into the cryptocurrency-fund market.
Thus far, Grayscale’s spot Bitcoin ETF is the clear leader, but BlackRock’s fund is quickly gaining traction. However, it will take some time to see how the playing field consolidates among spot Bitcoin ETF providers.
This raises the question of which spot Bitcoin ETF to choose – and more fundamentally, whether it makes sense to buy any of them. Aniket Ullal, head of ETF data and analytics at CFRA Research, observed that the 11 approved spot Bitcoin ETFs are “practically identical.”
This shouldn’t be too surprising. A spot Bitcoin ETF has only one job: to track the price moves of Bitcoin. There’s no stock picking or portfolio reshuffling involved.
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Nevertheless, these funds will inevitably charge annual fees, also known as expense ratios. For example, a quick check on Yahoo Finance revealed that Grayscale’s spot Bitcoin ETF has an annual expense ratio of 1.5%; meanwhile, the BlackRock ETF’s annual expense ratio is just 0.12%.
That’s a big difference, so if you’re going to shop around for a spot Bitcoin ETF, be sure to read each fund’s prospectus carefully. These funds don’t have lengthy histories, and high expense ratios can substantially detract from your long-term returns.
Here’s what’s amazing about the recent surge in Bitcoin-fund interest. Believe it or not, the assets under management (AUM) of spot Bitcoin ETFs has already surpassed the AUM of silver ETFs.
This, without a doubt, is a consequence of Bitcoin being in the news lately and silver being largely ignored by the mainstream media. I assure you, it has nothing to do with the actual value proposition of Bitcoin versus silver.
Silver is still a must-own asset, and I’m actually glad that the mainstream press isn’t talking about silver now. That’s exactly when I like to buy assets – when there’s no hype surrounding them.
In any case, I’d prefer not to pay expense-ratio fees to any corporate fund managers, if I can help it. It looks like BlackRock’s expense ratio is comparatively low, but I still don’t feel the need to pay a fund manager to help me get exposure to Bitcoin.
After all, I’m a grown adult and I can buy Bitcoin on an exchange without any fund manager’s help. While I’m at it, I can buy gold and silver without using ETFs. That, I believe, it what self-directed wealth accumulation is all about.
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