Cryptocurrency
Bitcoin ETF: A Worldwide Comparison
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In Brief
Explore Bitcoin ETFs from around the world: Learn how they operate, types, and examples. Also learn the difference between owning BTC and a Bitcoin ETF.
Bitcoin ETFs and crypto ETFs in general have been a hot topic for years, as the approval of a spot Bitcoin ETF in the US could potentially lead to an influx of money from Wall Street institutions, potentially lifting the price of bitcoin to new highs.
While we have witnessed the approval of Bitcoin Futures-based ETFs in the US, we are yet to see a spot Bitcoin ETF trade on a US exchange. In other parts of the world, however, you can already buy Bitcoin ETFs that have actual bitcoin as the underlying asset.
Read on to learn more about Bitcoin ETFs, how they work, and a few examples from around the world.
What is Bitcoin?
Bitcoin, developed in 2008 by an individual or group under the pseudonym Satoshi Nakamoto, represents a groundbreaking shift in currency technology. Distinct from traditional currencies such as the dollar or euro, Bitcoin is entirely digital and functions on a decentralized network. This means it operates independently of central banking authorities. All Bitcoin transactions are verified through a network of computers and recorded on a blockchain, a public ledger that ensures transparency and security.
A key feature of Bitcoin is its reliance on cryptography for securing transactions. Each transaction is cryptographically signed to verify that it's being initiated by the rightful owner of the bitcoins, thereby bolstering security and preventing fraud.
Moreover, the decentralization of Bitcoin is maintained by individuals known as Miners. Bitcoin mining involves the use of powerful computers to solve complex mathematical problems, confirming and securing transactions on the blockchain. Once a transaction is recorded on the blockchain, it becomes nearly impossible to alter, providing a high level of security against potential tampering or hacking.
This combination of decentralization, cryptographic security, and the innovative blockchain technology positions Bitcoin not just as an alternate monetary system but also as a more secure and transparent method for conducting transactions.
Understanding Bitcoin ETFs
An exchange-traded fund (ETF) is a publicly traded investment vehicle that tracks the performance of an underlying asset. An ETF can track the price of a single asset, such as gold, or a combination of assets, such as an index of stocks.
Exchange-traded funds work similarly to mutual funds. However, unlike mutual funds, ETFs are actively traded on securities exchanges, enabling investors to buy and sell them just like stocks.
Bitcoin ETFs track the performance of bitcoin (BTC) as the underlying asset, allowing investors to gain exposure to BTC without actually owning the asset. This way, investors get to speculate on Bitcoin’s price movements without having to deal with securely buying and storing the digital currency.
Before You Dive Deeper
Before you continue, it’s worth noting that you can buy Bitcoin (BTC) using Trust Wallet. Trust Wallet can be downloaded as a mobile app, or you can install the Trust Wallet Extension for your desktop browser. For this guide, we'll focus on creating a new wallet using the Trust Wallet mobile app.
Step 1: Get the most updated version of Trust Wallet
Below you’ll see the steps to create a new wallet, but you could just as easily import an existing Web3 wallet to Trust Wallet, if that’s your preference.
To create a new wallet:
Download, install and then open Trust Wallet
Choose “Create a new wallet”.
Choose your backup option, or you can optionally postpone the backup process by choosing “Skip”.
Start using Trust Wallet.
Step 2: Buy crypto using your Trust Wallet
Select the “Buy” button, from the wallet’s Home screen.
Choose Bitcoin (BTC), and enter the amount you wish to purchase.
Select the third party provider & payment method you’d like to use.
Select “Buy BTC”, and then follow the steps to complete the purchase.
How Do Bitcoin ETFs Work?
Like traditional ETFs, Bitcoin ETFs are issued by financial institutions that invest in Bitcoin and manage the fund on behalf of investors. A Bitcoin ETF can be structured in different ways. For example, it could have Bitcoin Futures of “physical” bitcoin as the underlying asset held by the ETF issuer on behalf of the investor.
With spot Bitcoin ETFs, the issuing institution buys BTC and holds it. It then issues the fund’s shares, which track the asset’s price movement, on a securities exchange. In this case, investors directly hold a portion of the underlying bitcoin. As BTC’s price rises and declines, so does the value of the ETF.
Bitcoin Futures ETFs, on the other hand, don’t hold bitcoin directly. Instead, they hold Bitcoin futures contracts, which derive their value from the price of Bitcoin. A futures contract is a financial agreement that allows two parties to buy or sell an asset at a predetermined price in the future.
Arguably, the biggest advantage of Bitcoin ETFs is that they trade on regulated securities exchanges, making them accessible to all types of investors while alleviating the need for the technical know-how of secure crypto asset storage.
Therefore, investors who aren’t well-versed with crypto assets can gain exposure to bitcoin without the need for a crypto wallet or trading on a crypto exchange platform.
More articles on Bitcoin & crypto ETFs
Bitcoin ETFs Around the World
As Bitcoin adoption increases, Bitcoin ETFs are becoming increasingly popular investment vehicles, leading to the listing of several of these ETFs on exchanges across the globe.
Bitcoin ETFs in North America
There are several available ETFs in North America. However, the US Securities and Exchange Commission is yet to approve a Bitcoin spot ETF in the US, while Canada already has several.
Here are some of the most popular ETFs in the region.
Purpose Bitcoin ETF (BTCC) The Purpose Bitcoin ETF (BTCC), launched in February 2021, was the first “physically”-backed Bitcoin ETF in North America.Within its first two days, the fund had raised $421 million in assets. BTCC is a spot Bitcoin ETF and is backed by a little over 27,000 BTC. Purpose Bitcoin ETF trades on the Toronto Stock Exchange (TSX).
ProShares Bitcoin Strategy (BITO) BITO was the first Bitcoin ETF to be approved to trade in the US. The ETF was launched in October 2021 and went on to raise about $1 billion in assets within a few days, making history as one of the most heavily traded ETFs. The Bitcoin futures ETF currently holds about $904 million in assets under its management and trades on the Chicago Mercantile Exchange (CME).
Bitcoin ETFs in Europe
Europe's first spot Bitcoin ETF, the Jacobi FT Wilshire Bitcoin ETF, launched in August 2023 in Euronext Amsterdam.
Jacobi FT Wilshire Bitcoin ETF The eco-friendly ETF from Jacobi asset management aligns its goals with the European Union's concerning sustainable blockchain innovations. This is a great first step toward ETF adoption in Europe as other asset management firms consider investing in the blockchain industry in the region.
Bitcoin ETFs in Latin America
The first Bitcoin ETF in Latin America was approved in 2021. The Brazil Securities and Exchange Commission approved the investment fund from QR Capital, which is the largest asset management provider in the region.
QR Asset Management Bitcoin ETF (QBTC11) The QR Asset Management Bitcoin ETF trades under the ticker QBTC11 on the B3 Stock Exchange in Sao Paulo. The ETF holds 727 BTC as of September 2023.
Bitcoin ETFs in Asia-Pacific
Hong Kong leads in the adoption of ETFs in the APAC region, launching the first Bitcoin Futures ETF in December 2022.
CSOP Asset Management ETF CSOP Bitcoin futures ETF (3066.HK) trades in the Hong Kong Stock Exchange. Notably, it is not trading in mainland China due to its stringent regulations against crypto products.
Samsung Bitcoin Futures Active ETF Samsung Bitcoin Futures Active ETF launched on the Hong Kong Stock Exchange in January 2023 under 3135.HK.
Other Regions and Emerging Markets
Global X 21Shares Bitcoin ETF (EBTC) The Global X 21Shares Bitcoin ETF is the first Bitcoin ETF in Australia, having launched in May 2023. The ETF holds “physical” BTC and is traded on the CBOE Australia exchange.
Conclusion
Bitcoin ETFs have been a game-changer for traditional investors looking to diversify their portfolios to include the world’s leading cryptocurrency without the hassle of having to securely buy and store bitcoin.
As more Bitcoin ETFs are launched, more retail and institutional investors are expected to enter the arena, potentially pushing up the price of bitcoin further.
While Bitcoin ETFs offer an easier way to invest in Bitcoin, it’s important that you understand the global Bitcoin market and its drivers, and the impact of Bitcoin ETFs on the market by conducting your own research.
Frequently Asked Questions
What Exactly is a Bitcoin ETF?
A Bitcoin ETF is an exchange-traded fund that tracks the performance of Bitcoin. It allows investors to speculate on Bitcoin's price movements without directly owning the cryptocurrency, thus avoiding the complexities of buying and securely storing it.
How Do Spot and Futures Bitcoin ETFs Differ?
Spot Bitcoin ETFs hold actual Bitcoin, offering investors a share in the underlying BTC. In contrast, Bitcoin Futures ETFs invest in Bitcoin futures contracts, deriving value from Bitcoin's future price rather than holding the cryptocurrency itself.
Why Are Bitcoin ETFs Significant for People Who Want BTC Exposure?
Generally speaking, Bitcoin ETFs provide an easier and more secure way for investors unfamiliar with the intricacies of cryptocurrencies to gain exposure to Bitcoin.
Is Owning BTC Directly the Same as Owning Shares of a Bitcoin ETF?
No, they're different. Owning BTC directly means you have actual possession of the cryptocurrency, requiring a crypto wallet such as Trust Wallet and a basic understanding of blockchain technology. Owning shares in a Bitcoin ETF means you own a part of a fund that tracks Bitcoin's value, not the Bitcoin itself. This is a more traditional investment method, akin to stock market investing, and doesn’t involve directly handling the cryptocurrency.
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Note: Any cited numbers, figures, or illustrations are reported at the time of writing, and are subject to change.