Is this cryptocurrency ETF a no-brainer buy?

The Bitwise Bitcoin ETF is a simple, low-cost way to invest in major cryptocurrencies.

For many years, investors were able to buy Bitcoin (Bitcoin 0.53%) only through dedicated cryptocurrency exchanges. They could also invest in exchange-traded funds (ETFs) linked to futures contracts or Bitcoin funds, but the former did not always closely track Bitcoin’s spot price, while the latter charged high expense ratios.

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

Image source: Getty Images.

I never direct ownership Bitcoin, but I once had three Bitcoin futures ETFs – ProShares Bitcoin Strategy ETF, VanEck Bitcoin Strategy ETFIt is Valkyrie Bitcoin and Ether Strategy ETF – in my individual retirement account (IRA). But after spot price ETFs were approved, I sold those ETFs and bought the Bitwise Bitcoin ETF (BITB -1.60%) instead. Here, I’ll explain why I bought that particular ETF and why it might still be the obvious best way to invest in Bitcoin.

What is the Bitwise Bitcoin ETF?

With $2.16 billion in AUM, the Bitwise Bitcoin ETF is the fifth largest spot ETF in the world. However, its 0.20% annual sponsor fee makes it cheaper than its larger peers.

ETF

AUM

Sponsor Fee

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

Grayscale is still the biggest player because it converted its original Bitcoin fund, launched in 2013, into a spot 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 much less attractive than more recent entrants.

Furthermore, Grayscale – along with iShares, Ark and Bitwise – still relies on Coin base as your Bitcoin custodian rather than owning your own keys. The only leading ETF that holds its own Bitcoins is Fidelity’s Wise Origin Bitcoin Fund.

All five major ETFs have 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 ETFs when they trail the cheaper ones.

Data source: Y charts.

Why you should buy the Bitwise ETF to expose your portfolio to Bitcoin

For some investors, it may seem smarter to simply buy Bitcoin on Coinbase, which charges individual trading fees, rather than paying recurring fees for Bitwise’s low-cost ETF. But if you’re like me and want to keep all your investments organized in a single brokerage account, then it makes sense to add a few shares 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 withdraw it without incurring penalties until I’m almost 60 years old. These restrictions prevent me from investing too much money in the ETF or withdrawing too early, and encourage me to use dollar-cost averaging to compensate for Bitcoin’s wild price swings.

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

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

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