How to Invest in Bitcoin Using ETFs and ETNs
Bitcoin ETFs (Exchange-Traded Funds) and ETNs (Exchange-Traded Notes) provide a regulated way to gain exposure to Bitcoin's price movements without directly owning the cryptocurrency. These instruments track Bitcoin's price, either through physical holdings or derivatives, and are traded on traditional stock exchanges.
Key Features of Bitcoin ETFs/ETNs:
- Annual Fees: Typically range from 0.15% to 2.00% (Total Expense Ratio).
- Physical vs. Synthetic Backing: Some hold actual Bitcoin, while others use futures contracts.
Regional Availability:
- USA: Bitcoin spot ETFs (e.g., iShares Bitcoin Trust, Fidelity Advantage Bitcoin ETF).
- Europe: Primarily ETNs due to UCITS diversification rules.
Why Choose Bitcoin ETFs/ETNs?
- Regulated Exposure: Avoid the complexities of crypto exchanges and wallets.
- Liquidity: Trade like traditional stocks during market hours.
- Institutional Adoption: Major firms like BlackRock and Fidelity now offer Bitcoin ETFs.
Bitcoin ETFs in the USA: What You Need to Know
The SEC approved spot Bitcoin ETFs in early 2024, marking a milestone for institutional crypto investment. Unlike earlier futures-based ETFs, these track Bitcoin's real-time price.
Top Bitcoin ETFs in the USA:
- iShares Bitcoin Trust (IBIT) – BlackRock’s low-cost option.
- Fidelity Advantage Bitcoin ETF (FBTC) – Competitive fees and strong backing.
Impact on the Crypto Market:
- Increased institutional participation may stabilize Bitcoin’s price long-term.
- Early 2024 saw significant pre-approval price rallies, suggesting market optimism.
Bitcoin ETNs in Europe
Due to UCITS regulations, Europe lacks Bitcoin ETFs but offers physically backed ETNs. These function similarly, holding actual Bitcoin to mirror its performance.
Popular European Bitcoin ETNs:
- 21Shares Bitcoin ETP – Low TER and high liquidity.
- CoinShares Physical Bitcoin – Direct Bitcoin collateralization.
Alternatives: Blockchain ETFs
For broader crypto exposure, consider Blockchain ETFs, which invest in companies developing blockchain technology.
Comparing Bitcoin ETFs and ETNs
Key Selection Criteria:
- Costs: Lower TERs mean better long-term returns.
- Liquidity: Higher assets under management (AUM) ensure easier trading.
- Replication Method: Physical backing reduces counterparty risk.
Performance Metrics (As of June 2025):
| ETF/ETN Name | 1-Year Return | TER |
|------------------------|--------------|--------|
| iShares Bitcoin Trust | +120% | 0.25% |
| 21Shares Bitcoin ETP | +115% | 0.95% |
FAQs About Bitcoin ETFs and ETNs
1. Are Bitcoin ETFs safer than buying Bitcoin directly?
Yes—ETFs are regulated, eliminating risks like exchange hacks or wallet mismanagement.
2. Why are there no Bitcoin ETFs in Europe?
UCITS rules require diversification, which single-asset Bitcoin ETFs can’t meet. ETNs fill this gap.
3. Do Bitcoin ETFs pay dividends?
No. Returns come solely from price appreciation.
4. How do I choose the best Bitcoin ETF?
Prioritize low fees, high AUM, and physical backing.
5. Can I short Bitcoin ETFs?
Some brokers allow shorting, but volatility makes this high-risk.
6. What’s the tax treatment of Bitcoin ETFs?
Varies by country—often taxed as capital gains, similar to stocks.
Final Thoughts
Bitcoin ETFs and ETNs democratize crypto investing, combining convenience with regulatory oversight. For U.S. investors, spot ETFs like IBIT and FBTC offer optimal cost-efficiency, while Europeans can leverage physically backed ETNs. Always compare fees, liquidity, and structure before investing.