HODL: Best Current Spot Bitcoin ETF

Summary Bitcoin’s long-term value is driven by the unstable nature of modern monetary policy and its potential as a hedge against fiat system issues. Spot bitcoin ETFs, especially those with low fees and high liquidity, offer retail investors easy access to bitcoin’s price movements. VanEck Bitcoin ETF is the top pick until March 2025 due to its waived fees, but post-March, BTC, IBIT, and FBTC become more attractive. Investors should monitor VanEck and Gemini’s performance and be prepared for bitcoin’s volatility, switching ETFs if necessary after fee waivers end. Bitcoin ( BTC-USD ) has been by far the most successful asset class since its inception in 2009. If I am ever tempted to sell part of my position, I like to look at charts like this one, comparing bitcoin’s performance to that of the S&P 500 ( SPY ): Data by YCharts Fundamentally, my long-term case for bitcoin remains the unstable nature of modern monetary policy. The US dollar emerged from the post-WWII Bretton Woods agreement as the sole global reserve currency, and has retained its status more recently through the tenuous petrodollar system. This dependence on the dollar has artificially strengthened its value, leading to ever-expanding trade and budget deficits that cannot continue indefinitely (known as Triffin’s Dilemma ). The modern fiat system has only been around for about 50 years (post the demise of the Gold Standard ), and the dollar has lost almost 90% of its value since then. It is reasonable to assume that as the world changes, so will its monetary policy, and that bitcoin will be a larger part of the future than it has been in the past. Whatever is bad for fiat systems, like deficits, inflation, and capital controls, is good for bitcoin. To go along with this kind of hedging characteristic, Bitcoin’s ever-important hash rate has continued to climb steadily: Data by YCharts That is another chart I would like to buy into! Institutional adoption continues to increase, and I believe that we are still in the early innings of bitcoin’s acceptance into more mainstream financial outlets. Buying Into Bitcoin Getting exposure to bitcoin’s performance, however, has not always easy. Investors could buy bitcoin and store it themselves, which many think is the safest route, leaving you 100% in control. But this could lead to costly mistakes, like the famous man who mistakenly threw away a hard drive with about half a billion dollars worth of bitcoin on it (and who is still looking for it to this day). For the last decade, you could buy bitcoin on an exchange, such as Coinbase ( COIN ), and just leave it there, trusting Coinbase to take care of it for you. This was a decent option, but it required a separate account, had fairly high trading fees, and could not be held in a tax-advantaged retirement account. Soon, other products arose to make it easier to get exposure to bitcoin. For instance, the ProShares Bitcoin ETF ( BITO ) tracked bitcoin futures, and Gracyscale’s Bitcoin Trust ( GBTC ) held bitcoin directly and was structured as a closed end fund. These did not track very well with bitcoin’s price, however, making them poor options. Then, on January 10th of this year, the SEC approved the first spot bitcoin ETFs. This was a momentous occasion, finally allowing millions of investors easy access to bitcoin’s price movements, in brokerage accounts they already had. Expenses are now low and liquidity high, and there is no barrier to entry for new investors. The next step on the journey occurred on September 20th of this year, when the SEC approved options to be traded on Blackrock’s ( BLK ) iShares Bitcoin Trust ETF ( IBIT ). Options trading on bitcoin is a massive step forward, opening up new strategies and ways to capitalize on bitcoin’s large price swings. In light of this new approval, I decided to take a few minutes to analyze the current bitcoin ETFs. Current ETFs Since all bitcoin spot ETFs hold bitcoin and track bitcoin’s price movements, they all offer virtually identical exposure: Data by YCharts So what differentiates them? The two biggest factors to consider are price and AUM. A lower expense ratio is always better, and more AUM means better liquidity and security. Among bitcoin ETFs, one further differentiator is the custodian. The ETF sponsor itself does not hold the actual bitcoins (with one exception noted below), but rather hires a custodian to keep the bitcoins safe. Of the 12 total current bitcoin spot ETFs, 9 of them use Coinbase as their custodian. There are only three exceptions. Fidelity holds their bitcoins for their Fidelity Wise Origin Bitcoin Fund ETF ( FBTC ). VanEck uses Gemini for their VanEck Bitcoin ETF ( HODL ). The Hashdex Bitcoin ETF ( DEFI ) uses BitGo. Coinbase is the most trusted custodian in the space, so it is with good reason that they are trusted with so much bitcoin. However, they are a massive target, as anyone who was able to successfully hack them would have access to an unrivaled treasure hoard. This is very unlikely to occur, but there is something to be said about diversifying custodians. Fidelity should be credited for keeping their bitcoin in house, and they are definitely worth considering diversifying away from Coinbase. DEFI has less under $7m in AUM and a huge 0.9% expense ratio, so they are not worth considering. Gemini is perceived as less trustworthy than Coinbase, as they are well known for a massive data breach in 2022 and more recently for locking up customers’ funds for almost two years in the fallout of the collapse of FTX. However, they have never lost customers’ money and are still considered safe, if not quite as safe as Coinbase. The fact that HODL uses Gemini, then, is a bit of a wash, since it does diversify away from Coinbase, but is diversifying away from the safest custodian. For diversification, then, I see FBTC as worth holding, but exposure to Gemini alone is not worth holding HODL. Fees Among the ETFs that use Coinbase as their custodian, IBIT is by far the largest and most liquid, with over $22b in AUM and a trusted sponsor in BlackRock. They are also currently the only spot bitcoin ETF to have options approval from the SEC. They should eventually have the most liquid options. IBIT charges a 0.25% expense ratio, so that is the baseline. FBTC also charges 0.25%. GBTC is the second-largest spot bitcoin ETF, and it charges an extremely high 1.5% expense ratio. That kind of fee should be avoided. Grayscale does have a large amount of experience with digital assets, however, and are worth considering as a sponsor. They offer a cheaper version of GBTC named the Grayscale Bitcoin Mini Trust ( BTC ) that only charges 0.15%. For exposure to Grayscale, then, BTC is the play, and it is cheaper than the larger IBIT and FBTC funds. Every other spot bitcoin ETF has an expense ratio above 0.15%. Hence, FBTC and IBIT are the top contenders, but if minimizing fees is the goal then BTC is best. The one exception is HODL, which actually does not charge any fees until 3/31/25 (or until they reach $1.5b in AUM, which seems unlikely as they have only half of that now). This is intriguing, as it represents essentially free money, which should never be ignored. So, is it worth hodling? HODL VanEck sponsors several well-known sector ETFs, such as the VanEck Gold Miners ETF ( GDX ), the VanEck Semiconductor ETF ( SMH ), and the VanEck Morningstar Wide Moat ETF ( MOAT ). They also have significant experience with digital assets, releasing the VanEck Vectors Digital Transformation ETF ( DAPP ) in early 2021. DAPP and HODL are both terms that are common in the crypto world, making it seem like VanEck wishes to be perceived as an insider to the community. Indeed, reinforcing this sentiment is VanEck’s commitment to donate 5% of their profits to Bitcoin developers. At $750m AUM, HODL is large enough to provide needed liquidity. More importantly, they are waiving the expense ratio on their fund through 3/31/25. Seeing as their exposure to bitcoin is identical to the other products, this advantage in fees makes HODL my top pick for spot bitcoin ETF until March of next year. This is as free as money gets. Until 3/31/25, HODL is a no-brainer. After 3/31/25, HODL’s 0.20% expense ratio is not convincing enough to me, when compared with Grayscales BTC at 0.15%, or the larger players IBIT and FBTC’s 0.25% with greater liquidity and option potential. Diversifying custodians away from Coinbase is one potential point in favor of HODL, but seeing as Coinbase has a better record than Gemini, I see this advantage as providing little value. Risks As with any bitcoin ETF, HODL is exposed to the price of bitcoin, which has experienced a 75%+ drawdown on four separate occasions since 2010. Investors should be prepared to stomach these “cypto winters” and have a plan to weather the next inevitable large drawdown. Since the waived fees are the primary investment case for HODL at this point, it is worth monitoring the position in case VanEck decides to change its mind or change the terms of its free offer. VanEck as the sponsor also has a duty to manage the fund properly and maintain the needed exposure to real bitcoin. Any issues at VanEck could affect the investment. Given VanEck’s expertise in digital assets and experience running sector ETFs, I trust their decision to choose Gemini as the custodian for HODL. However, Gemini’s reputation is not untarnished, and further issues at Gemini could also jeopardize the performance of HODL. So it is worth keeping an eye on Gemini’s health as a custodian. All in all, I find it unlikely that anything serious will be uncovered at VanEck or Gemini before March. Investors looking to enter a long position in a bitcoin ETF may want to take advantage of the lack of fees on HODL until then, and consider switching to BTC, IBIT, or FBTC afterward.

Source: Seeking Alpha