The emergence of spot Bitcoin and Ethereum Exchange-Traded Funds (ETFs) has sparked a seismic shift in the cryptocurrency market, offering investors an innovative, regulated route to digital asset exposure. Since their launch, these funds have played a pivotal role in elevating the value of Bitcoin (BTC) and Ethereum (ETH), shaking up traditional investment landscapes. If you're looking to diversify your portfolio with crypto but are unsure where to start, understanding these ETFs is crucial. Here's an insightful rundown of the biggest and most influential spot crypto ETFs available today—and how they could reshape your investment strategy.
What Are Spot Crypto ETFs?
Before diving into the specifics, it's essential to grasp what a spot crypto ETF entails. An Exchange-Traded Fund (ETF) operates much like shares in a company; owning ETF shares means holding a part of a fund that contains various assets. In the case of spot crypto ETFs, these funds are backed by actual cryptocurrencies held securely by a custodian, rather than derivatives or futures contracts.
This distinction is significant. Unlike futures ETFs, which track the price of crypto without owning the assets, spot ETFs actually hold the cryptocurrency. This offers a more direct—and potentially more stable—exposure to price movements.
Pros and Cons of Spot Crypto ETFs
Advantages:
- Regulation: Spot ETFs operate within regulatory frameworks, offering investors a safer harbor compared to volatile and unregulated crypto exchanges.
- Accessibility: Investors can buy ETFs easily through traditional brokerage accounts without needing to manage wallet keys or exchange accounts.
Drawbacks:
- Custody Concerns: Since the underlying crypto belongs to the ETF issuer and not the investor, you don’t control the private keys—the old adage “not your keys, not your coins” applies.
- Availability: Access depends on jurisdiction and regulatory stance, with some regions restricting retail participation.
Beyond ETFs, it's worth noting that Exchange-Traded Products (ETPs) exist as a broader category—including ETFs, Exchange-Traded Notes (ETNs), and others—tailored for various markets and investor types.
The Top Spot Bitcoin ETFs to Watch
1. BlackRock’s iShares Bitcoin Trust (IBIT)
BlackRock, the world’s largest asset manager managing over $12.5 trillion in assets, launched IBIT in January 2024 and quickly became a dominant force. Despite BlackRock CEO Larry Fink’s earlier skepticism about Bitcoin, the firm pivoted to crypto with conviction, filing with the SEC to convert its Bitcoin trust into a spot ETF using Coinbase as custodian.
IBIT made history as the fastest growing ETF ever: it soared from holding 227 BTC on day one to over 717,000 BTC within six months, controlling more than $85 billion in assets under management (AUM). The ETF also benefited from an initial discounted fee of 0.12%, now set at 0.25%.
Availability: US investors can trade IBIT on NASDAQ through standard brokerages. European investors access IBIT via a separate European spot Bitcoin ETP called IB1T, whereas UK retail participation remains limited pending regulatory approval.
2. Fidelity Wise Origin Bitcoin Fund (FBTC)
Fidelity has a deep history in crypto research, dating back to 2014, and re-entered the spot Bitcoin ETF race in 2023 after earlier SEC setbacks. Its Bitcoin fund, FBTC, launched alongside IBIT and rapidly amassed substantial Bitcoin holdings—reaching over 161,000 BTC within six months and currently holding more than 206,000 BTC ($2.16 billion in AUM).
Fidelity offers FBTC at a fee of 0.25%, conveniently accessible to US investors via popular brokerage platforms, including Fidelity itself. For European and UK investors, a corresponding Bitcoin ETP is available on major European exchanges, with professional investors in the UK having access on the London Stock Exchange.
3. Grayscale Bitcoin Trust (GBTC)
Established in 2013, Grayscale was a pioneer in offering regulated crypto exposure through its Bitcoin Trust. GBTC converted to a spot ETF in January 2024 after a lengthy regulatory battle, including suing and winning against the SEC.
However, GBTC’s trajectory has been more turbulent: outflows following its ETF conversion resulted in significant Bitcoin sell-offs, temporarily pressuring prices. Notably, some declines were influenced by FTX’s bankruptcy liquidation. Today, GBTC holds approximately 222,000 BTC, about one-third of its original holdings.
Despite charging a relatively high fee of 1.5%—six times higher than its rivals—Grayscale continues to attract a loyal investor base. US investors can access GBTC through major brokerages, but unfortunately, European and UK retail investors currently lack direct access.
Leading Spot Ethereum ETFs Shaping the Market
1. BlackRock’s iShares Ethereum Trust (ETH A)
BlackRock also leads the pack in Ethereum ETFs. Approved in May 2024 and commencing trading in July, the iShares Ethereum Trust controls over 2.1 million ETH with an AUM exceeding $6.4 billion. While initial adoption was slow and volatile, ETH A has recently seen surging inflows, signaling rising investor confidence.
The trust charges a 0.25% fee and uses Coinbase for custodianship. Notably, BlackRock has engaged with the SEC on potential staking features for Ethereum ETFs—a highly anticipated development that could further enhance yield potential.
For European investors, no direct Ethereum ETP equivalent is available yet from BlackRock, though other providers offer alternatives in the region.
2. Fidelity Ethereum Fund (FE)
Matching its Bitcoin offering, Fidelity’s Ethereum fund also launched in July 2024, quickly accumulating nearly 570,000 ETH and managing $1.22 billion in assets. Like FE’s Bitcoin sibling, the fee is 0.25%, and custody is handled internally by Fidelity Digital Assets.
Although Fidelity initially proposed staking as part of the Ethereum ETF structure, regulatory delays have postponed this feature. Currently, US investors can freely trade FE, but international access remains limited pending future product development.
3. Grayscale Ethereum Trust (ETH E)
Grayscale’s Ethereum Trust, available since 2017, followed a conversion to spot ETF status with trading starting concurrently with other ETH ETFs in July 2024. However, it has mirrored GBTC’s challenges with outflows that have cut its holdings from over 2 million ETH to just over 570,000 ETH—approximately a quarter of its original amount.
Charging 1.5% fees, Grayscale remains a prominent name despite its challenges. The firm also offers an Ethereum Mini Trust with much lower fees (0.15%), catering to cost-conscious investors.
As with its Bitcoin products, Grayscale is lobbying for staking capabilities to be added to its Ethereum ETFs, a move that could provide enhanced returns.
Alternatives for European and UK Investors
Due to regulatory restrictions, direct access to US-listed spot Bitcoin and Ethereum ETFs is limited for many non-US investors. However, other Exchange-Traded Products (ETPs) provide alternatives:
- CoinShares Physical Bitcoin ETP (BITC): Charges 0.25%, holding nearly $2 billion in assets.
- 21Shares Ethereum Staking ETP (AE): Incorporates staking with a 1.52% yield and charges a 1.49% fee, catering to investors seeking yield on top of price exposure.
These products allow investors in the EU and UK to participate in the crypto ETF space with varying degrees of access, features, and fees.
What’s Next? The Rise of Altcoin ETFs
Spot Bitcoin and Ethereum ETFs are only the beginning. Several altcoin spot ETFs are already in development or trading, poised to impact the prices of other cryptocurrencies positively. Staying updated on these products can offer early opportunities in crypto markets beyond the two largest coins.
Conclusion
Spot Bitcoin and Ethereum ETFs have revolutionized how investors engage with the cryptocurrency market by blending regulatory safety, ease of access, and direct asset backing. The leading ETFs from BlackRock, Fidelity, and Grayscale showcase varying paths to success—whether through rapid growth, resilience, or innovative features like staking.
While geographic and regulatory barriers remain, alternatives like ETPs provide ways for international investors to gain exposure. Whether you are a seasoned investor or crypto-curious, incorporating these ETFs into your investment strategy could provide a transformative edge.
Stay informed, assess the characteristics and fees carefully, and consider how these products fit your portfolio goals. The future of crypto investing is evolving fast, and spot ETFs are undeniably at the core of this exciting new frontier.
Note: This article is for educational purposes only and does not constitute financial or investment advice. Always consult with a professional advisor before making investment decisions.
By Wolfy Wealth - Empowering crypto investors since 2016
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Disclosure: Authors may be crypto investors mentioned in this newsletter. Wolfy Wealth Crypto newsletter, does not represent an offer to trade securities or other financial instruments. Our analyses, information and investment strategies are for informational purposes only, in order to spread knowledge about the crypto market. Any investments in variable income may cause partial or total loss of the capital used. Therefore, the recipient of this newsletter should always develop their own analyses and investment strategies. In addition, any investment decisions should be based on the investor's risk profile.
