Is This Cryptocurrency ETF an Obvious Buy?

The Bitwise Bitcoin ETF is a simple and inexpensive way to invest in the best cryptocurrency.

For many years, investors could buy Bitcoin (BTC -0.14%) only via exchanges dedicated to cryptocurrencies. They could also invest in exchange-traded funds (ETFs) linked to Bitcoin futures or trusts, but the former did not always closely track the Bitcoin spot price, while the latter charged high spending fees .

That all changed in January when the U.S. Securities and Exchange Commission (SEC) approved 11 spot-priced Bitcoin ETFs, making it easier for retail and institutional investors to invest in the world’s top cryptocurrency. Today, the top five Bitcoin ETFs at spot price total $56.5 billion in assets under management (AUM).

Image source: Getty Images.

I have never direct ownership Bitcoin, but I’ve already owned three future Bitcoin ETFs — ProShares Bitcoin Strategy ETF, VanEck Bitcoin Strategy ETFAnd Valkyrie Bitcoin and Ether Strategy ETF — in my Individual Retirement Account (IRA). But after the ETFs were approved at spot price, I sold these ETFs and bought the Bitwise Bitcoin ETF (BITB -1.60%) instead. Here I’ll tell you why I bought this particular ETF and why it might still be the best, simple way to invest in Bitcoin.

What is the Bitwise Bitcoin ETF?

With $2.16 billion in assets under management, the Bitwise Bitcoin ETF is the fifth-largest spot price ETF in the world. However, its 0.20% annual referral fee makes it cheaper than its larger peers.

ETFs

Assets under management

Sponsorship fees

As of June 14, 2024. Data source: Blockworks.

Grayscale is still the biggest player because it converted its original Bitcoin trust, launched in 2013, into a spot-price ETF. But its 1.5% fee – which Grayscale Investments CEO Michael Sonnenshein says is justified by the fund’s “size, liquidity and track record” – makes it far less attractive than newer players.

Additionally, Grayscale — along with iShares, Ark and Bitwise — still relies on Coinbase as a Bitcoin custodian instead of holding its own keys. The only prominent ETF that holds its own Bitcoins is Fidelity’s Wise Origin Bitcoin Fund.

The top five ETFs have actually outperformed Bitcoin over the past four months. The two cheapest funds – Ark and Bitwise – also outperformed their more expensive peers. So, for now, there doesn’t seem to be much reason to pay for the more expensive spot price ETFs when they lag behind in performance compared to the cheaper ones.

The data source: Y charts.

Why You Should Buy Bitwise ETF to Expose Your Portfolio to Bitcoin

For some investors, it may make more sense to simply buy Bitcoin on Coinbase, which charges individual trading fees, instead of paying recurring fees for Bitwise’s low-cost ETF. But if you’re like me and want to keep all your investments organized in one brokerage account, then it makes sense to add a few stocks of this ETF to your portfolio.

I keep my Bitwise Bitcoin ETF shares in an IRA, but I can only add $6,500 to the account each year and I can’t cash out without incurring penalties until I’m almost 60. These restrictions prevent me from investing too much money in the ETF or cashing out too early, and they encourage me to use dollar cost averaging to offset wild swings in Bitcoin prices.

Therefore, if you are bullish on Bitcoin and want to get some exposure to its potential growth through your brokerage account, I think the Bitwise Bitcoin ETF remains an obvious buy and a better overall investment than its more expensive peers.

Leo Sun has positions in Bitwise Bitcoin ETF Trust. The Motley Fool holds positions and recommends Bitcoin and Coinbase Global. The Motley Fool has a disclosure policy.

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