The race to become the go-to Bitcoin exchange-traded fund appears to have a runaway winner. And when it comes to ETFs, investing in the biggest, most heavily traded fund is usually the best option.
Bitcoin prices surged past $100,000 for the first time just last week.
ETFs that track the spot price of Bitcoin have become a huge hit since the Securities and Exchange Commission gave them the green light in January. Today, the funds hold more than $115 billion worth of the cryptocurrency, according to FactSet.
After individuals, who own about 70% of the Bitcoin supply, funds and ETFs are the token’s largest owner, controlling about 6% of the world’s 21 million Bitcoins. The sum owned by funds is just ahead of the total sitting in the dormant wallets of Bitcoin founder Satoshi Nakamoto, according to Bitcoin brokerage River.
The big winner in the Bitcoin ETF game is the iShares Bitcoin Trust ETF (IBIT), which has attracted $53 billion in the 11 months since its launch. It is twice as big as its next two competitors, the $21 billion Fidelity Wise Origin Bitcoin Fund (FBTC) and the $22 billion Grayscale Bitcoin Trust ETF (GBTC).
The iShares fund’s dominance has only accelerated in recent weeks, as excitement over President-elect Donald Trump’s Nov. 5 election victory sent Bitcoin to new heights. The cryptocurrency, trading as low as $68,000 before election day, surged past $100,000 last week before falling back to about $96,000 Tuesday.
Since the November election, investors funneled a net $9.3 billion into Bitcoin ETFs, according to FactSet. The iShares fund has taken the lion’s share: about $8.2 billion. The next biggest winner was the Fidelity fund, which claimed just $1.4 billion. (The funds’ inflows total more than the sectors’ total net flows because some funds had outflows.)
IShares Bitcoin Trust ETF also dominates in trading volume. The fund trades about 43 million shares a day, compared with just 6 million for the Fidelity fund and less than 4 million for the Grayscale fund, according to Morningstar.
That is an important consideration. Investor fees for both the Fidelity and iShares funds amount to 0.25%, according to the funds’ websites, while the Grayscale fund charges 1.5%, a legacy from its pre-ETF conversion days. Since most Bitcoin ETFs (other than Grayscale Bitcoin Trust ETF) are priced similarly, trading costs may be the difference maker between funds.
Higher trading volume typically translates into lower bid-and-ask spreads, the small markups ETF investors pay each time they buy or sell shares. While spreads fluctuate, investors can expect to pay a markup of only about a penny a share to trade the iShares fund, says Morningstar analyst Bryan Armour, the lowest among Bitcoin ETFs.
It’s an advantage the iShares fund may never relinquish. Since the spring, iShares Bitcoin Trust ETF has become the default option for market makers dealing in Bitcoin ETFs, ensuring there are always deep wells of liquidity for buyers and sellers. The upshot is that the iShares ETF’s spreads aren’t only narrowest among Bitcoin funds, but narrower than what investors are likely to find trading Bitcoin directly on major crypto exchanges, Armour adds.
“It’s the easiest way to trade Bitcoin,” he says.
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