January 10th, 2024 would serve as a historic day as the U.S. SEC gave the green light to all 11 spot Bitcoin Exchange Traded Funds (ETFs). The approval did not come cheap as the SEC pushed back on several occasions.
However, after some back and forth, the regulator, led by Chairman Gary Gensler, gave in to the demand. As a result of the decision, investors can now access shares of Grayscale’s GBTC and BlackRock’s IBIT.
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GBTC vs. IBIT vs. FBTC Comparison
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When looking to compare between different Bitcoin ETFs, there are three key factors of consideration:
- Expense Ratio: Think of the expense ratio like a maintenance fee you pay for someone to manage your investment. It’s a percentage of your investment that goes towards the fund’s operational costs every year.
- Liquidity: This is about how easy it is to buy or sell the ETF without affecting its price too much. High trading volume means more liquidity.
- Performance and Risk: All three ETFs have shown similar recent price increases, indicating good performance. However, their risk levels, measured by things like volatility (price swings) and drawdown (peak to trough decline), vary.
This article gives a detailed explanation of Bitcoin ETFs, and the three common options, GBTC, IBIT, and FBTC. In summary, this is how the three ETFs compare:
- Expense Ratio:
- GBTC (Grayscale Bitcoin Trust ETF) has a high expense ratio of 1.50%. That’s like paying $15 every year for every $1,000 you invest.
- IBIT (iShares Bitcoin ETF by BlackRock) has a much lower expense ratio of 0.25%, so you only pay $2.50 for every $1,000 invested annually.
- FBTC (Fidelity Wise Bitcoin ETF) started with a 0% expense ratio, which means it was free initially but will change to 0.25%, matching IBIT’s fee.
- Liquidity:
- IBIT is very liquid, attracting a lot of trading activity, which means it’s easier for you to trade without big price swings.
- GBTC has been experiencing outflows, meaning people are selling off their investments, which could indicate issues with liquidity or investor confidence.
- FBTC, while newer and with a compelling initial offer of no fees, still hasn’t outpaced IBIT in terms of liquidity.
- Performance and Risk:
- GBTC has experienced a significant drawdown in the past, indicating higher risk.
- IBIT and FBTC have similar, lower risk profiles compared to GBTC.
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In conclusion:
- If you prefer lower fees and higher liquidity (ease of trading), IBIT (iShares Bitcoin ETF by BlackRock) is a solid choice. It’s like getting a good deal for a service that’s in demand and easy to use when you want.
- If you’re attracted to newer options with initially no fees (which will eventually match IBIT’s fees) and are okay with a bit of uncertainty for potentially higher rewards, FBTC (Fidelity Wise Bitcoin ETF) could be appealing.
- GBTC (Grayscale Bitcoin Trust ETF) might be less attractive due to its higher fees and liquidity challenges, but it has a long history and was a pioneer in the space.
In layman’s terms, IBIT seems to offer a good balance of cost, ease of trading, and reliability. FBTC is an interesting newcomer with a promising start, especially on the fee front. GBTC, despite its pioneering status, faces challenges that might make it less appealing compared to the others.
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