Trading Bitcoin Without the Hassle? ETFs Offer Easy Access, But Watch Out for Costs

The Securities and Exchange Commission (SEC) is presently reviewing 13 spot Bitcoin (CRYPTO: BTC) ETFs before approving them.

Previously, the SEC had turned down comparable exchange-traded fund (ETF) applications; however, an appeal court determined that the SEC's decision was "arbitrary and capricious."

Big news for all types of investors would be the approval of a spot Bitcoin ETF. It's important to follow the SEC's ruling whether you're a major cryptocurrency investor or you're just putting money in a retirement account. It may make it easier for a lot more people to invest in the newly popular crypto asset class.

Why It's a Big Deal

Derivatives like futures contracts are used by established Bitcoin funds, such as the Grayscale Bitcoin Trust, to follow the price of Bitcoin. These funds, however, are unable to really redeem Bitcoin futures for the underlying asset, which can lead to prices that are significantly off from Bitcoin's true worth. Notably, in late 2022, Grayscale Bitcoin Trust traded at about half of its net asset value.

On the other hand, a spot Bitcoin ETF will hold Bitcoin. This implies that the ETF will be able to monitor the cryptocurrency's value far more precisely.

Additionally, investors may see more clearly what they are purchasing since Bitcoin rather than a derivative will be held by the funds. A certain quantity of Bitcoin owned by the fund will be correlated with each share of the ETF.

Nevertheless, shareholders will continue to pay fees in the form of cost ratios from spot Bitcoin ETFs. Investors should be aware of these costs and how they affect their investment, especially given the heightened interest in the current generation of ETFs.

How Much To Own a Bitcoin ETF

For the first six months, Invesco Galaxy intends to waive the charge for the first $5 billion in invested assets. It's a frequent tactic used by new funds into a cutthroat market. When taxes are taken into consideration, however, it might not make sense for long-term investors to attempt to purchase shares in the Invesco fund and then move to a less expensive fund after the free period ends.

It's also important to note that the majority of the suggested ETFs have not disclosed their fees. Notably absent from the list above is Blackrock. Considering the fund company's scale, investors might anticipate a comparatively modest charge.

The most significant thing for investors to know is that all of the listed costs are far lower than the expense ratios of the currently available Bitcoin investment products. Grayscale levies a management fee of 2 percent. 0.95% is the fee for the ProShares Bitcoin Strategy ETF. Investors will so receive a fund that not only more closely follows Bitcoin but will also cost less.

Investors could also choose to pay the costs associated with a spot Bitcoin ETF for a few other reasons.