By Kari McMahon, Unchained featuring Brian Spinelli, CFP®, AIF®, Co-Chief Investment Officer
Are you a hodler, trader, or true believer? Here are Unchained’s recommendations for the best spot bitcoin ETF based on what type of investor you are.
Not all spot bitcoin exchange-traded funds (ETFs) are created equal, even if they are all tracking the price of the exact same asset.
On the surface, the 11 spot bitcoin ETFs, which were approved for trading by the U.S. Securities and Exchange Commission (SEC) on Jan. 10, may look largely the same. But there are subtle differences among the various offerings, from fees and other costs to custodians and liquidity, that may suit different types of investors.
Unchained spoke to industry experts across the ETF and investing industry to break down the distinctions and help find the best funds by investor type.
This article is for informational purposes only. Participants should be aware of the risks associated with investing in cryptocurrency, including market volatility and regulatory changes. Nothing contained herein is intended as financial or investing advice, and due diligence and research are advised before participating, since investments in financial assets including cryptocurrency are speculative, illiquid, and involve a high risk of loss.
1. Buy and ‘Hodl’ Investors
Most investors looking to choose between the various spot bitcoin ETFs will likely follow a buy and hold investment strategy — also known as “hodling” in crypto parlance. This is a passive investment strategy that refers to buying an investment and holding it for a long time regardless of the market environment.
This type of investor will want to make sure they find an ETF sponsor and custodian they are comfortable with, said Brian Spinelli, co-chief investment officer at wealth advisory firm Halbert Hargrove, which oversees around $2.7 billion in assets. This could mean picking a sponsor whose products they are already familiar with, he noted.
“Something like the BlackRock product or the Fidelity product as you see those accumulate more inflows and more assets that in itself makes it more attractive to investors because bigger products tend to look safer [and] they tend to have more liquidity,” said Roxanna Islam, head of sector and industry research at VettaFi, a data and analytics-driven ETF platform.
All three experts interviewed by Unchained agreed that fees are an important differentiator for this investor type because they’re charged annually and that will eat into gains. To attract investors to their offerings, sponsors have gotten into a fee war by lowering their rates and introducing fee waivers for an initial period of time. However, Islam recommends long-term investors look beyond those waivers since they won’t necessarily last that long.
“There’s quite a few products in that low 20 basis point range,” Islam said of the groups’ long-term, post-waiver fees. “That’s going to be a big differentiator.”