What Is Bitcoin ETF?
Also known as: Spot Bitcoin ETF, Bitcoin Exchange-Traded Fund, BTC ETF
In short
A Bitcoin ETF is an exchange-traded fund that tracks Bitcoin's price and can be bought and sold like a stock on traditional exchanges. It lets investors gain exposure to Bitcoin's price without using a crypto wallet or crypto exchange.
Bitcoin ETFs fall into two main types. Spot Bitcoin ETFs buy Bitcoin directly and hold it with a custodian, and the value of the fund's shares is based on the Bitcoin the fund holds. Futures-based ETFs invest in Bitcoin futures contracts instead of Bitcoin itself; rolling these contracts over when they expire can create additional cost and tracking error.
In the US, the first futures-based Bitcoin ETF began trading in 2021. Spot Bitcoin ETFs were approved by the US Securities and Exchange Commission (SEC) in January 2024 after years of applications, and funds from large asset managers such as BlackRock and Fidelity began trading. This development was seen as an important milestone for the industry because it made it easier for institutional investors and retirement accounts to access Bitcoin. Similar products were later approved for Ethereum as well.
An ETF investor owns shares of the fund, not Bitcoin itself; therefore they cannot withdraw Bitcoin to their own wallet or use it on the network. Funds charge an annual management fee and trade only during the hours the exchange is open. The concentration of assets with a few custodians is also a debated issue from a decentralization standpoint.
Last updated: · This content is for information purposes only and is not investment advice.