Bitcoin-ETF:er het ”Trump trade” – så väljer du rätt

Donald Trump’s election victory has kindled more interest in popular Bitcoin exchange-traded funds, and, while there may be reasons for adding the cryptocurrency to your portfolio, it is important to pick the right ETF.

The outcome of the U.S. presidential election was widely seen as a win for the crypto industry. Trump promised during his presidential campaign to make the U.S. the “crypto capital of the planet” and even launched his own crypto coin.

A number of crypto allies also prevailed in House and Senate races after the industry spent more than $170 million to promote its interests.

Bitcoin’s price has surged since the election. Shares of the coin have risen more than 25% since Nov. 5 and briefly passed $88,000 before falling back to $86,038 Tuesday morning. At the same time, investors have poured more $1.3 billion into the more than one dozen ETFs that hold the digital asset.

There’s a bullish case for Bitcoin even outside Trump’s potential favor, according to 21Shares Research. “We may see further capital flowing into Bitcoin because of the easing monetary conditions emerging worldwide,” the firm said. “Bitcoin acts as a ‘liquidity sponge,’ attracting capital during periods of monetary expansion” when investors seek out risky assets.

Here’s what investors looking to buy Bitcoin ETFs need to know.

Bitcoin was founded in 2009 to be a new digital currency that consumers could own and trade without the intermediation of banks or other big investment firms. Early cryptocurrency adopters set up their own wallets and acquired coins either by mining them or seeking out trading partners in online chat rooms.

The approach provides a maximum in terms of control and anonymity, but requires effort and a certain degree of technical expertise.

Bitcoin exchanges are another option, helping investors store their cryptocurrency and giving them a ready-made forum to buy and sell. But this space, filled with upstart companies, has been plagued by scandals, such as the one that landed FTX founder Sam Bankman-Fried behind bars.

Spot Bitcoin ETFs hit the market in January after years of regulatory delays. These investment funds, which own Bitcoin, trade throughout the day on stock exchanges. They don’t accomplish Bitcoin’s original aspiration—of creating an anonymous way to transmit value outside the traditional financial system. But for investors who merely wish to hitch their portfolio to Bitcoin’s star, they can be a convenient and relatively inexpensive alternative.

While Bitcoin’s vibe has always been anti-authority, when it comes to ETFs, it is usually best to take the opposite tack—following the herd and going with the biggest, best-known market options.

The reason has to do with the economics of the ETF industry. The biggest funds tend to have the lowest investment fees and highest-trading volumes, both key features investors should look for in an ETF.

For most investors, these criteria make iShares Bitcoin Trust ETF (ticker: IBIT), from investing giant BlackRock, the obvious choice. The fund’s $34 billion in assets is twice its next-largest competitor’s. The fund has received the lion’s share of the new money flowing into Bitcoin ETFs in the past several days—about $1.1 billion.

The iShares Bitcoin Trust’s large asset base means the ETF can be profitable for iShares with just a tiny asset-based fee. To that end, the fund’s 0.25% expense ratio is on the low end among Bitcoin ETFs, and could come down since ETFs have a history of lowering fees as they collect more assets.

The fund’s popularity, which translates into high trading volume, also keeps bid-and-ask spreads—small premiums investors pay whenever they buy and sell—to a minimum. These spreads amount to just one cent, or 0.02%, of the fund’s share price, according to Morningstar. It’s a fraction of the spread Morningstar lists for many other Bitcoin ETFs, even some from well-known firms.

Still, the iShares fund isn’t an investors’ only option. Fidelity Wise Origin Bitcoin (FBTC) has $15 billion in assets and boasts narrow bid-and-ask spreads. Still, the Fidelity fund has much smaller trading volume and an expense ratio of 0.25% that matches, but doesn’t beat, iShares’.

The $17 billion Grayscale Bitcoin Trust ETF (GBTC) is another potential alternative, with a large asset base and low trading costs. But this fund’s expense ratio of 1.5%, more than 10 times the rival iShares fund charges, is likely a deal breaker for many investors.

The Grayscale fund began its life in 2013, more than a decade before other popular Bitcoin ETFs. At the time, the Securities and Exchange Commission didn’t permit ETFs to own Bitcoin directly, so it operated differently. When the SEC changed course and permitted so-called spot Bitcoin ETFs earlier this year, the Grayscale fund converted to an ETF. The comparatively high fee is a legacy of the previous format.

A spokeswoman noted that Grayscale has since launched Grayscale Bitcoin Mini Trust ETF (BTC), which has an expense ratio of 0.15%.