The Best Bitcoin ETF to Buy & One to Avoid

Summary

The video discusses the remarkable success of the Bitcoin ETF launched in 2024, which has outperformed 90% of other ETFs in its first quarter. With over $10 billion in investments, it's the most successful ETF launch ever. The presenter analyzes the performance of various Bitcoin ETFs, shares key indicators for choosing one, and reveals personal reasons for not investing in them despite their potential. Two upcoming macro events are highlighted as potential catalysts for further price increases in Bitcoin.

Takeaways

• 🚀 The Bitcoin ETF launched in January 2024 has outperformed 90% of all other ETFs in the first quarter, attracting over $10 billion in investment in less than two months, marking the most successful ETF launch ever.
• 📈 Bitcoin's value increased by 70% in the first quarter, primarily driven by the availability of Bitcoin ETFs.
• 🤔 The speaker raises the question of why they don't own any of these ETFs and aims to address this in the video for viewers who share the same curiosity.
• 🛑 The video is not about the technical aspects of Bitcoin or blockchain, but rather focuses on the listing and performance of Bitcoin ETFs and the criteria for choosing one.
• 📊 There are about 10 Bitcoin ETFs available, with the number expected to grow. They are exchange-traded funds designed to mimic Bitcoin's returns without direct purchase by investors.
• 💰 The price of each ETF varies due to different numbers of outstanding shares and Bitcoin holdings, which affects their total assets and share price.
• 🏦 The custody of physical Bitcoin is a consideration, with most funds using Coinbase, while some outliers like VanEck use Gemini, and Fidelity manages their own Bitcoin.
• 📉 The Grayscale Bitcoin Trust (GBTC) has a high expense ratio of 1.5%, which the speaker views as excessive and a factor that may lead to fund outflows.
• 📈 The iShares Bitcoin Trust is favored for its lower expense ratio and higher liquidity, indicated by average volume and market cap.
• 💼 The speaker personally will not invest in any Bitcoin ETFs due to already having a substantial investment in Bitcoin, adhering to a self-imposed rule of not investing more than 5% of their portfolio in alternative assets.
• 🗓️ Two significant macro events are anticipated to potentially boost Bitcoin's value: the Bitcoin halving event in mid-April and China's possible approval of a spot Bitcoin ETF in Q2 2024.

Q & A

What is the significance of the Bitcoin ETF launched in January 2024?

The Bitcoin ETF launched in January 2024 is significant because it has outperformed more than 90% of all other ETFs in the first quarter, with over $10 billion invested in less than two months, marking the most successful ETF launch ever.

How has Bitcoin's performance been in the first quarter of 2024?

Bitcoin has seen a substantial increase of 70% in the first quarter of 2024, primarily driven by the availability of Bitcoin ETFs.

What are the two major macro events mentioned in the script that may influence Bitcoin ETFs' performance in the near term?

The two major macro events are the Bitcoin halving in mid-April, which historically has led to an increase in Bitcoin's price, and the potential approval of a spot Bitcoin ETF in China in the second quarter of 2024, which could infuse significant capital into the Bitcoin ecosystem.

Why might someone choose to invest in a Bitcoin ETF instead of buying Bitcoin directly?

People might choose to invest in a Bitcoin ETF because most of their money is invested in IRA or 401k accounts, which do not allow direct Bitcoin purchases. A Bitcoin ETF provides an indirect way to invest in Bitcoin through these accounts.

What is the primary reason the speaker will not be investing in any Bitcoin ETFs?

The speaker will not be investing in any Bitcoin ETFs because their initial Bitcoin investment already exceeds their self-imposed 5% rule for alternative investments in their portfolio.

What is the role of the ETF management company in the context of Bitcoin ETFs?

The ETF management company owns the Bitcoin either independently or via an exchange like Coinbase, and the ETF is designed to mimic the return on Bitcoin without the individual investor having to purchase Bitcoin on their own.

What is the importance of the expense ratio when choosing a Bitcoin ETF?

The expense ratio is important because it determines the cost of owning the ETF. A higher expense ratio, like the one for Grayscale Bitcoin Trust (GBTC), can significantly reduce the investor's returns over time.

How does the custody of the physical Bitcoin affect the risk associated with a Bitcoin ETF?

The custody of the physical Bitcoin affects risk because most funds use third-party custodians like Coinbase to manage the purchase and holding of Bitcoin. The use of a smaller custodian like Gemini or self-custody, as in the case of Fidelity, can influence the perceived security and risk level of the ETF.

What is the role of market cap and average volume in evaluating a Bitcoin ETF?

Market cap and average volume are indicators of liquidity. A higher market cap and volume suggest that it would be easier for an investor to buy or sell the ETF, providing a more level playing field in terms of market accessibility.

What is the difference between the Grayscale Bitcoin Trust and other Bitcoin ETFs in terms of fees?

The Grayscale Bitcoin Trust has a notably higher expense ratio of 1.5%, which is significantly higher than other Bitcoin ETFs, making it less attractive from a cost perspective.

How does the speaker plan to share more information about the Bitcoin ETFs discussed in the script?

The speaker plans to share more information by providing a link to a spreadsheet in the description of the video, allowing viewers to research the ETFs further on their own.