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7 min read 
This year has been all about exchange-traded funds, or ETFs, in the crypto market. It started from late 2023 when the US Securities and Exchange Commission (SEC) lost its appeal against Grayscale’s proposed Bitcoin ETF. From there, it was apparent that Bitcoin ETFs were about to become a reality, and the first batch of 11 Bitcoin ETFs was approved and launched in January 2024.
This milestone drove Bitcoin to its all-time high earlier this year, and soon, the approval and launch of Ethereum ETFs followed. Now that two of the biggest cryptocurrencies have their own funds at several stock exchanges, which ones are the better investment decisions? Let’s find out.
Key takeaways
- Bitcoin ETFs: Introduced in October 2021, Bitcoin ETFs allow investors to gain exposure to Bitcoin without directly managing the cryptocurrency. The market has expanded to include multiple ETFs, with significant inflows and growing popularity. Bitcoin ETFs are seen as a stable investment, particularly with Bitcoin’s established role as a hedge against inflation.
- Ethereum ETFs: First spot Ethereum ETFs were approved in 2024, following the model of Bitcoin ETFs. These ETFs have attracted substantial interest, especially from those looking to invest in Ethereum’s utility-driven ecosystem. The market includes several top-performing ETFs, such as Grayscale’s ETHE and Bitwise’s ETHW, which offer different benefits in terms of fees and investment strategies.
- Current state and performance: Both Bitcoin and Ethereum ETFs are growing in popularity, with Bitcoin ETFs being more established and Ethereum ETFs rapidly catching up. Ethereum ETFs, such as Grayscale’s ETHE and Bitwise’s ETHW, are particularly noteworthy for their strong performance in 2024, making them attractive options for investors seeking exposure to Ethereum’s growth potential.
Why are crypto ETFs so important?
Crypto ETFs (exchange-traded funds) have become crucial in the financial landscape because they make cryptocurrency investment more accessible, regulated, and integrated into traditional financial systems. By allowing investors to gain exposure to digital assets like Bitcoin and Ethereum without the need to directly purchase or manage them, ETFs simplify the process significantly. This is especially important for those unfamiliar with cryptocurrencies’ technical aspects, such as setting up digital wallets or securing private keys.
The introduction of crypto ETFs brings a level of regulatory oversight that enhances trust and credibility. Regulatory approval, particularly by authorities like the SEC in the US, signals that cryptocurrencies are moving towards mainstream acceptance, which is crucial for attracting more conservative institutional and retail investors who might have been hesitant due to concerns about security and regulatory uncertainty.
Crypto ETFs also contribute to market liquidity and stability. Since they are traded on major stock exchanges, they offer the same level of liquidity as traditional ETFs, making it easier for investors to buy and sell their holdings. This increased participation can help reduce the overall volatility in the cryptocurrency market, making it more stable over time.
Also, these ETFs provide an avenue for portfolio diversification. Investors can gain exposure to a variety of cryptocurrencies or crypto-related assets without having to allocate large portions of their capital, thus spreading their risk. Additionally, crypto ETFs may offer tax efficiencies, simplifying the process of reporting gains and losses compared to directly holding cryptocurrencies.
Bitcoin ETFs explained
Bitcoin ETFs are investment funds that track the price of Bitcoin and are traded on traditional stock exchanges. They allow investors to gain exposure to Bitcoin’s price movements without needing to buy or manage the cryptocurrency directly. These ETFs simplify Bitcoin investment by removing the need for investors to handle the complexities of digital wallets, private keys, and the direct purchase of Bitcoin on crypto exchanges.
The first Bitcoin ETF was introduced in the United States in October 2021. The ProShares Bitcoin Strategy ETF (ticker: BITO) was the first to gain approval from the SEC. This ETF is based on Bitcoin futures contracts rather than directly holding Bitcoin itself.
How many Bitcoin ETFs are there in the US market?
As of 2024, there are multiple Bitcoin ETFs in the US market, including both futures-based and spot-based ETFs. While the initial offerings were based on Bitcoin futures, the market has since expanded with spot Bitcoin ETFs, which directly track the price of Bitcoin. The exact number of Bitcoin ETFs can vary as new funds are launched and others are closed, but several prominent ETFs, such as those from ProShares, Valkyrie, and others, are actively traded.
Current state of the Bitcoin ETF market
The Bitcoin ETF market in the US has grown significantly since its inception in 2021. The introduction of spot Bitcoin ETFs in 2024 has been a major milestone, attracting substantial inflows from institutional and retail investors. The market is characterized by strong interest due to Bitcoin’s potential as a hedge against inflation and a store of value. However, it also faces challenges, including regulatory scrutiny and the inherent volatility of the underlying asset.
Bitcoin ETFs have made Bitcoin more accessible to a broader range of investors and have played a key role in integrating Bitcoin into traditional financial markets. The market continues to evolve, with ongoing discussions about the introduction of more cryptocurrency ETFs and the potential impact of these financial instruments on the broader crypto market.
Ethereum ETFs explained
Ethereum ETFs are investment funds that track the price of ETH and are traded on traditional stock exchanges. Like Bitcoin ETFs, these funds allow investors to gain exposure to Ethereum’s price movements without needing to buy or manage the cryptocurrency directly. Ethereum ETFs provide a simpler and more regulated way for investors to participate in the Ethereum market.
Ethereum ETFs in the US market are a more recent development compared to Bitcoin ETFs. While Ethereum futures-based ETFs began gaining attention in the early 2020s, the SEC approved the first spot Ethereum ETFs in 2024, allowing investors to track the price of Ethereum directly.
How many Ethereum ETFs are there in the US market?
As of 2024, several Ethereum ETFs are available in the US market. These include both futures-based and spot-based ETFs, with spot ETFs being the latest addition following their approval in 2024. The exact number of ETFs can vary, but key players in the ETF market, such as ProShares and Valkyrie, have launched Ethereum ETFs, expanding options for investors.
Top-performing Ethereum ETFs in 2024
As of August 2024, several Ethereum ETFs have emerged as strong performers in the market. Here are some of the top options:
Grayscale Ethereum Trust (ETHE)
- Assets under management (AUM): $9.78billion
- Expense ratio: 2.50%
- Performance: As one of the largest and most established Ethereum funds, ETHE has shown significant growth, although it comes with relatively high fees. It is currently in the process of being converted into a formal ETF.
Bitwise Ethereum ETF (ETHW)
- AUM: $229 million
- Expense ratio: 0.20%
- Performance: Bitwise has attracted substantial inflows, making it a popular choice for investors. The fund is known for its lower fees and charitable contributions to Ethereum’s development.
iShares Ethereum Trust (ETHA)
- AUM: $264.80 million
- Expense ratio: 0.25%
- Performance: Managed by BlackRock, this ETF is one of the leading Ethereum-focused funds, leveraging BlackRock’s extensive experience in managing large ETFs.
Fidelity Ethereum Fund (FETH)
- AUM: $73.62 million
- Expense ratio: 0.25%
- Performance: Fidelity’s ETF has gained traction due to its robust custodial services and reputation in the market, though it is smaller compared to some of the other top funds.
VanEck Ethereum ETF (ETHV)
- AUM: $34.28 million
- Expense ratio: 0.20%
- Performance: VanEck’s entry into the Ethereum ETF market has been well-received, especially with its competitive fees and extended fee waivers.
Bitcoin ETF vs. Ethereum ETF: Which is a better investment option in 2024?
As of 2024, both Bitcoin and Ethereum ETFs have garnered significant attention, and the choice between them largely depends on your investment strategy and risk tolerance. Here’s a comparison based on the latest data and trends:
Bitcoin ETFs
- Performance: Bitcoin ETFs have seen substantial inflows, especially after the approval of several spot Bitcoin ETFs earlier in the year. Bitcoin’s price has fluctuated but is on an upward trend, with predictions that it could reach up to $86,000 by the end of September 2024.
- Market sentiment: Investor sentiment remains bullish, particularly with the upcoming Bitcoin halving in 2024, which historically has led to price surges. Bitcoin ETFs are seen as a stable long-term investment, especially for those looking to capitalize on Bitcoin’s scarcity.
Ethereum ETFs
- Performance: Ethereum ETFs are catching up, particularly with the anticipated approval of spot Ethereum ETFs. Ethereum’s price has been more volatile than Bitcoin’s but shows potential for significant gains, with predictions suggesting it could reach around $2,900 by September 2024.
- Growth potential: Ethereum has been compared to silver in its relationship to Bitcoin’s gold. With lower trading volumes and prices, Ethereum has the potential for higher percentage gains. The expected launch of Ethereum ETFs could drive significant price movements, making it an attractive option for investors seeking higher returns with slightly more risk.
Final thoughts
It comes down to stability vs. potential: If you prefer stability and a more established asset, Bitcoin ETFs might be the better choice. However, if you’re willing to take on more risk for the possibility of higher returns, Ethereum ETFs could be the way to go, especially with the upcoming catalysts in the Ethereum market.
Ultimately, the best choice depends on your investment goals and risk tolerance. Both Bitcoin and Ethereum offer unique opportunities in the ETF space, with Bitcoin providing more stability and Ethereum offering greater growth potential.
Frequently Asked Questions
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01.
What are Bitcoin ETFs?
Bitcoin ETFs are investment funds traded on traditional stock exchanges that track the price of Bitcoin. They allow investors to gain exposure to Bitcoin without needing to directly purchase or manage the cryptocurrency.
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02.
What are Ethereum ETFs?
Ethereum ETFs are similar to Bitcoin ETFs but track the price of Ethereum (ETH). They provide investors with a way to invest in Ethereum through traditional financial markets without holding the cryptocurrency directly.
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03.
Which one is better, Bitcoin ETF or Ethereum ETF?
The choice between Bitcoin and Ethereum ETFs depends on your investment goals. Bitcoin ETFs are generally seen as more stable, with Bitcoin being viewed as a store of value. Ethereum ETFs offer higher growth potential due to Ethereum’s role in decentralized applications and smart contracts. Your decision should be based on your risk tolerance and investment strategy.
