Best Bitcoin ETF Fees: Compare Top Providers

Spot Bitcoin ETFs (exchange-traded funds) have finally arrived and that’s big news for Bitcoin.

Here, we’ll discuss common questions about Bitcoin ETFs and the impact they’ll have. But first, here’s a breakdown of the current fees for spot Bitcoin ETFs (February 25th, 2024):

Grayscale: The Grayscale Bitcoin Trust (GBTC) fee is 1.5% — the fund holds 502,713 BTC with Coinbase.

BlackRock: iShares Bitcoin Trust (IBIT) fee is 0.25% fees for the first 6 months (or $5 billion) — the fund holds 52,026 BTC with Coinbase.

Fidelity: Wise Origin Bitcoin Trust (FBTC) fee is 0.25% (with 0% fees until July 31, 2024) — holds 46,238 BTC in self-custody.

Ark/21 Shares: Ark/21 Shares Bitcoin Trust (ARKB) fee is 0.21% (0% fees for first 6 months or $1 Billion) — holds 14,390 BTC with Coinbase.

Bitwise: Bitwise Bitcoin ETF (BITB) fee is 0.20% (0% fees for first 6 months or $1 billion) — holds 13,576 BTC with Coinbase.

Invesco: Invesco Galaxy Bitcoin ETF (BTCO) fee is 0.25% (0% fees for first 6 months or $5 billion) — holds 6,864 BTC wth Coinbase.

VanEck: The VanEck Bitcoin Trust (HODL) fee is 0.20% of the fund — holds 2,885 BTC with Gemini.

Valkyrie: Valkyrie Bitcoin Fund (BRRR) fee is 0.49% (0% fees for first 3 months) — holds 2,635 BTC with Coinbase.

Franklin Templeton: Franklin Bitcoin ETF (EZBC) fee is 0.19% — holds 1,363 BTC with Coinbase.

WisdomTree: WisdomTree Bitcoin Trust (BTCW) fee is 0.30% (0% fees for first 6 months or $1 Billion) — holds 201 BTC with Coinbase.

(Fee information is updated daily here.)

There are four primary types of fees associated with these Bitcoin ETFs:

1. Expense Ratio Fee

2. Total Annual Fund Operating Expenses Fee

3. Bid-Ask Spread Fee

4. Custodian Fee

Let’s examine what each of these means…

Expense Ratio Fee

This ratio measures the fund’s operational cost, expressed as a percentage of the fund’s assets. It directly affects the returns you might expect from the investment, as higher expenses mean lower net returns.

Two examples:

1. The ProShares Bitcoin Strategy ETF (BITO) has an expense ratio of 0.95%.

2. The ProShares Short Bitcoin ETF (BITI) has an expense ratio of 0.97%.

Total Annual Fund Operating Expenses Fee

These are all the fund’s annual expenses, including management, administration, and compliance fees. These expenses are expressed as a percentage of the fund’s assets and can significantly impact the returns on your investment.

Example: The Simplify Bitcoin Strategy PLUS Income ETF has total annual fund operating expenses of 11.18% with other costs, primarily composed of interest expense, estimated at 10.33% for the fund’s initial fiscal year​​.

Another example is the Bitwise Bitcoin Strategy Optimum Roll ETF (BITC), which has a gross expense ratio of 0.92%.

Bid-Ask Spread Fee

This is the price difference between buyers' willingness to pay and sellers' acceptance. It’s an indirect cost for investors. 

The bid-ask spread for a Bitcoin ETF represents the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask). This spread is crucial for investors, as it can affect the overall cost of trading the Bitcoin ETF. 

The size of the bid-ask spread in Bitcoin ETFs can vary based on several factors, including the liquidity of the Bitcoin ETF and the underlying assets it holds. Highly liquid Bitcoin ETFs usually have tight bid-ask spreads, often just a few pennies apart. 

In contrast, Bitcoin ETFs traded less frequently or with less liquid underlying assets can exhibit wider bid-ask spreads.

Example: The SPDR S&P 500 ETF Trust (SPY) is known for its tight bid-ask spread, often around 0.0032%. This is mainly due to its high liquidity. 

The average bid/ask spread for the more than 2,900 ETPs (Exchange-Traded Products) listed on U.S. exchanges is about 0.52%. However, the median spread is much lower (i.e., around 0.20%).

Custodian Fee

Custodian fees ensure your Bitcoin remains safe (reason: Bitcoin needs secure storage to prevent theft or loss). These fees can vary depending on the provider and the assets being stored. Many top experts think spot Bitcoin ETFs could trigger several unwanted consequences for Bitcoin and crypto exchanges like Coinbase and Gemini due to lower transaction fees.

Spot Bitcoin ETFs have finally arrived, and that’s big news for Bitcoin. In the past, Bitcoin has often been (mistakenly) lumped in with “crypto” as something mysterious and risky. Bitcoin ETFs change this narrative since Bitcoin is now being sold by Wall Street to Main Street. Basically, Bitcoin is now legitimate in the eyes of traditional finance. 

As a result, these ETFs will become an initial touchpoint for many future Bitcoiners. In effect, Wall Street will be the advertising engine for a new generation of Bitcoin investors. 

Here we go.

The first thing to understand is exactly what an Exchange-Traded Fund (ETF) means.

Investopedia

An exchange-traded fund (ETF) is a type of pooled investment security that operates much like a mutual fund. Typically, ETFs track or seek to outperform a particular index, sector, commodity, or other asset. ETFs differ from mutual funds in that orders are executed throughout a trading day, whereas mutual fund orders can only be executed after market hours. This means that you can place a buy or sell order with your broker during trading hours, and it will execute it. A mutual fund order placed during the day will be executed after the market closes.

Now, let’s dive into spot Bitcoin ETFs. These exchange-traded funds directly track the price of Bitcoin, primarily by holding a large amount of the cryptocurrency itself. You can think of them as similar to a spot gold ETF, which holds physical gold bullion on behalf of its shareholders.

On Jan. 10, 2024, the Securities and Exchange Commission (SEC) approved 11 spot Bitcoin ETFs, the first spot Bitcoin ETFs ever, including ones from Fidelity, BlackRock and Invesco. These are the first cryptocurrency funds to trade on a major exchange and hold Bitcoin directly.

Btw if you’re not familiar with Bitcoin, CoinDesk explains it this way:

Bitcoin is the world’s first successful decentralized cryptocurrency and payment system, launched in 2009 by a mysterious creator known only as Satoshi Nakamoto. The word “cryptocurrency” refers to a group of digital assets where transactions are secured and verified using cryptography — a scientific practice of encoding and decoding data. Those transactions are often stored on computers distributed worldwide via a distributed ledger technology called blockchain.

Learn more about Bitcoin at the Swan Signal Bitcoin Blog.

With the arrival of these ETFs, it’s logical to wonder about the pros and cons of purchasing them as opposed to buying Bitcoin directly. While spot Bitcoin ETFs are a big boost for the overall Bitcoin market, that doesn’t necessarily mean one is the best path for you. 

They’re easy to buy. You don’t have to worry about creating a cryptocurrency exchange account, using a blockchain wallet, or figuring out crypto taxes. 

“Many investors can’t currently get exposure,” said Peter Eberle, the Chief Investment Officer of crypto investment firm Castle Funds. 

“For example, many people with 401(k)s, IRAs, and similar accounts can’t easily access Bitcoin. These investors will be able to allocate funds going forward. This will drive demand in coming years.”

Also, there’s more regulation provided since an ETF is audited, monitored, and tracked.

With ETFs, you don’t actually own or have direct access to Bitcoin. An ETF means you own shares in a fund that holds Bitcoin. When you hold your own Bitcoin, you can do whatever you want with it. 

Also, you’re paying fees. ETFs mean you wind up paying Wall Street pros (via fund management fees/expenses) for something that you could do on your own. On the other hand, you can buy Bitcoin directly (for example, via Swan) in just a few clicks. 

It’s also worth noting that Bitcoin ETFs may not track the price of Bitcoin exactly. There could be disparities between the performance of Bitcoin and an ETF. 

Also, there may be custodianship issues since most spot Bitcoin ETFs rely on a third-party custodian to store their Bitcoin (usually Coinbase). If Coinbase were to, say, run into financial woes or get penalized by the government for some reason, it could potentially put Bitcoin ETFs at risk? 

When it comes to fees, this newly minted spot Bitcoin ETFs are navigating the equilibrium between supply and demand. Currently, almost all of the Bitcoin ETF funds sport fees ranging from 0.19% to 0.25% (Grayscale’s is an outlier at 1.5%). 

That said, there may be ongoing volatility with these fees since Bitcoin ETFs are brand-new products. In fact, we’ve already seen a battle to lower fees among them — Ark-21Shares, Valkyrie, Invesco-Galaxy, and others showed higher fees initially but lowered them later. Bitwise, which opened with some of the lowest fees, dropped even lower, going from 0.24% to 0.20%.

On February 14, news from ETF.com revealed that Fidelity had cut the total expense ratio (TER) for one of its products from 0.75% to 0.35%.

This reduction, however, pertains to Fidelity’s European offering, the Fidelity Physical Bitcoin ETP, and not to its US-listed Fidelity Wise Origin Bitcoin Fund (FBTC).

VanEck announced plans to lower the fees for its spot Bitcoin ETF, as detailed in a document submitted to the U.S. SEC on February 15. It also said it will implement a unified sponsor fee of 0.20% for its VanEck Bitcoin Trust (HODL), starting from February 21, down from the current rate of 0.25%.

Why is Grayscale charging more at 1.50%?

CEO Michael Sonnenshein said Grayscale’s experience in dealing with crypto justifies the higher price point of its ETF: 

“We’re a crypto specialist. We’ve weathered all different types of speed bumps and advancements within the crypto ecosystem. For a lot of these asset managers and issuers, this is the first time they’re going to be dealing with the complexities that go into running these types of products.”

So, what should you expect going forward? That was the subject of a recent Swan Signal monthly newsletter.

These ETF issuers are viciously competing with one another for capital because, in the ETF world, liquidity is king. Typically, the largest ETF in an asset class dominates once it gains a significant market share and gathers momentum.

From there, they have the pricing power to set their fees as they see fit. Once an ETF wins, it’s very difficult for another to take its crown.

It depends.

Bryan Armour, editor of Morningstar, argues that Buy-and-Hold investors should focus on fees while active ETF traders should prioritize liquidity. He writes, “Investors can pick the best option for themselves by focusing on three fund criteria: fees, liquidity, and fund trading costs. Buy-and-hold investors should emphasize fees, those actively trading ETFs should focus on liquidity, and everyone should keep an eye on how trading costs affect performance.”

Also, keep in mind buying Bitcoin directly may still be the best answer. Buying real Bitcoin — which you can hold for the long term free of annual fees and do with as you please, whenever you want — keeps you in charge. 

Learn more about the benefits of holding real Bitcoin in self-custody with Swan.

It’s tough to say. It all depends on the success of the firms promoting these ETFs and the demand for the product. Advertising has just begun, and the conservative nature of traditional finance means many advisors and investors will want to see a track record for ETFs before increasing allocations. 

In fact, Grayscale Investments CEO Michael Sonnenshein told CNBC that most of the approved Bitcoin ETFs won’t survive saying, “Two to three of the spot Bitcoin ETFs will maybe obtain some kind of critical mass” of assets under management, but the others may be pulled from the market. I don’t ultimately think that the marketplace will have these 11 spot products we find ourselves having.” 

Spot Bitcoin ETFs smashed records on their first day trading seeing over 4.6 billion in trading volume, the highest ever for an ETF launch.

Spot bitcoin ETFs from BlackRock and Fidelity Investments each saw more than $2 billion of net inflows during their first 12 trading days, while Grayscale Bitcoin Trust suffered more than $5 billion of net outflows.

To stay on top of all the daily inflow and outflow changes, check out our new Daily Bitcoin ETF Show, hosted by Dante Cook.

Franklin Templeton reduced the fee of its Bitcoin ETF to become the cheapest among the new investment products. Until Aug. 2, 2024, the fund manager will also waive off fees for its ETF till the fund reaches assets under management (AUM) of $10 billion.

Bitcoin ETFs offer a more regulated and mainstream way to access Bitcoin if that’s important to you. 

Forbes

Unlike the direct ownership of Bitcoin, which involves technical challenges such as managing wallets and cryptographic keys, investing in ETFs offers a more conventional and straightforward way to gain exposure to Bitcoin’s market movements. 

It means Bitcoin is leveling up. As Swan Bitcoin CEO Cory Klippsten told Yahoo Finance:

“The top-of-funnel for investor class is going to change from something that is contrary to Bitcoin, which is all of the crypto scams and pump-and-dumps of the last six years, FTX and the like… Now you’re going to see a new era where some of the most credible, some of the most well-funded, trust brands in the world are going to be shouting from the rooftops with tens, maybe hundreds of millions of dollars of marketing expense, just talking about Bitcoin.”

Spot Bitcoin ETFs directly hold Bitcoin, and their value reflects the current price of Bitcoin. Futures Bitcoin ETFs invest in contracts that speculate on the future price of Bitcoin, giving purchasers price exposure without direct ownership. One issue with futures ETFs is they can have price discrepancies due to the dynamics of the futures market.

Apollo provides a nice overview on the different kinds of Bitcoin ETFs:

Spot Bitcoin ETFs

Are simpler, mainly focusing on securely holding Bitcoin. They are more accessible and understandable for the average investor.

Futures Bitcoin ETFs

Are more complex, involving futures contracts and associated roll costs. They require a deeper understanding of futures markets and their risks.

Bitcoin was designed as peer-to-peer money without the need for intermediaries. When opting into a Bitcoin ETF, investors can leverage price action, but at the cost of self-sovereignty and long-term returns. 

We urge you to research to fully understand the trade-offs between owning Bitcoin and currently purchasing a Bitcoin ETF.  

If you don’t think a Bitcoin ETF or private key cold storage wallet option suits you, perhaps a Bitcoin IRA and the tax advantages it presents do. If you need assistance or would like to discuss your individual retirement portfolio with one of our IRA specialists book a call here.

If a Bitcoin IRA isn’t for you but you are still looking for an alternative to Coinbase, find out how to break free of Coinbase in just three easy steps.