The iShares Bitcoin Trust (IBIT) ETF has performed well since its inception in 2024, a trend that may continue due to the ongoing supply and demand dynamics in the crypto industry. It has added over $54 billion in assets and is one of the market’s most highly traded Bitcoin ETFs, with daily volume of over $1.8 billion.
Grayscale’s BTC ETF is better
While the IBIT ETF is a good option for crypto investors, there are better alternative assets to buy to gain exposure to Bitcoin.
The best option is to buy and store Bitcoin in an off-chain address just as MicroStrategy is doing. By doing that, MicroStrategy avoids paying monthly or annual fees that investors in IBIT pay yearly.
The Grayscale Mini Bitcoin ETF (BTC) is the best Bitcoin fund because of its much lower fees. Unlike the bigger Grayscale Bitcoin Trust (GBTC), the BTC ETF charges a small expense ratio of 0.15%, making it more affordable than other funds from firms like Fidelity, Ark Invest, and Bitwise.
The IBIT ETF has an expense ratio of 0.25%. As such, you will pay a $250 annual fee to Blackrock, and just $150 to Grayscale. That $100 spread can go a long way, especially when you are holding your assets for many years. For example, excluding the compounding factor, and all factors held constant, the spread will be $1,000 in a decade.
Ideally, that spread would be worthwhile if one ETF is superior than the other one. However, the two funds are 100% similar since they just buy Bitcoin and use Coinbase as the custodian.
This spread also explains why investors have avoided the SPDR S&P 500 ETF (SPY) and moved to Vanguard’s VOO and Blackrock’s IVV. In 2024, the SPY ETF added over $19 billion in assets, while the Ishares IVV added over $87 billion, and VOO added $118 billion.
That’s because the SPY ETF charges an expense ratio of 0.09%, while the two funds charge 0.03%. While the spread is small, investors believe that they are much better off allocating funds to the cheaper funds since they all track the S&P 500 index.
Read more: BlackRock’s Bitcoin ETF experiences record outflow, signaling cooling market
IBIT and BTC have tailwinds
Still, the IBIT and BTC ETFs may continue to do well in the long term simply because of the coin’s supply and demand.
Bitcoin’s supply is falling, and CoinGlass data shows that balances on exchanges have continued falling this year. These balances are plunging as Wall Street continues buying more coins through ETFs. MicroStrategy has also continued falling.
Bitcoin’s annual inflation has continued rising and currently sits at 1.7%, much lower than the US CPI of 2.7%. That trend will continue because of the rising Bitcoin hash rate and mining difficulty.
Bitcoin will also continue doing well, as risks to the US economy will accelerate amid the soaring public debt and as countries consider using it as a strategic reserve.
Most importantly, Bitcoin has a long track record of doing better over time as its price jumped from below $1 in 2009 to a record high of $108,000.
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