On January 10, the U.S. Securities and Exchange Commission approved the first U.S.-listed spot bitcoin exchange-traded fund. When the market opened two days later on Friday, January 12, there were 11 spot bitcoin products trading on U.S. exchanges, with hundreds of millions of dollars flowing into them.

The path that led to the approval of these products was a particularly long and difficult one. Spot bitcoin ETF advocates, including crypto fans and asset managers, had fought a 10-year battle against regulators, elected officials and financial industry leaders. Team crypto’s eventual victory hinged on a federal appeals court ruling that found the SEC had erred in rejecting applications for the new products.

“I think it’s important to think about the regulatory and reputational implications here,” says Doug Schwenk, the CEO of Digital Asset Research, a cryptocurrency researcher and data provider that works with institutions, asset managers and wealth managers. “I think we’ll see continued progress in bitcoin as an investable asset and less of the regulator pushback. We’ll see fewer statements that crypto should be outlawed. It becomes a harder argument to make.”

While arguing for U.S.-listed spot bitcoin ETFs, cryptocurrency enthusiasts often repeated the claim that the products would provide an easy entry point for wealth managers and their clients. Indeed, some market watchers predict that hundreds of billions of dollars could flow into these new products within the first year, increasing both the market capitalization of bitcoin and total ETF assets in the U.S.

Now that the debate over whether these ETFs should be approved is over, it may be time to take a closer look at spot bitcoin ETFs and whether they’re really the big answer that advisors—and the digital assets industry—are looking for.

The Good
Investors will certainly enjoy better access to cryptocurrency now that it’s offered in ETF wrappers. Anyone can trade an exchange-traded fund. It’s tax-efficient by design and can trade in real time (like the underlying tokens).

It also means that a product representing the spot price movements of a digital asset can, for the first time, be held in a brokerage account in the U.S. alongside other asset classes like equities and fixed income.

“This makes exposure to bitcoin more broadly available, and I don’t really think we’ve seen the effects of that yet,” Schwenk says. “It’s going to take a while for these things to percolate to all the people who may not be paying as much attention, or who may have been turned off by the lack of access in brokerage accounts.

“As the news trickles down and the new availability of bitcoin does play out and people rethink their investment theses, we’re going to see more uptake of bitcoin and maybe a revisiting of crypto overall.”

Of course, it’s also simple to buy crypto directly, at least if you’re an individual investor. Yet it’s been notoriously difficult for financial advisors and many other intermediaries. So it’s to their benefit that spot ETFs have arrived: By using an ETF to account for more—or all—of their clients’ cryptocurrency allocation, advisors can more easily account for those assets while managing portfolios.

For the cryptocurrency industry, the products are also an important step toward normalizing the holding and trading of digital assets, Schwenk says.

“It signals that there’s some movement towards greater acceptance and legitimacy. The whole regulatory regime remains a challenge, still, but this is definitely a step in the right direction instead of the industry continuing to hit a brick wall where nothing new can happen.”

How To Differentiate
All 11 of the new spot bitcoin ETFs hold the same asset—bitcoin tokens. They all behave very similarly, and there’s not a lot to distinguish them when it comes to management. Advisors hunting crypto funds for clients will be sifting through only a handful of differentiators: the expense ratios, the brands, the managers and the fund prices.

As far as their expense ratios, the new ETFs range from a low of 0.2% for the Bitwise Bitcoin ETF (BITB) to a high of 1.5% for the Grayscale Bitcoin Trust ETF (GBTC).

When it comes to brand choice, Schwenk thinks investors will gravitate to established names like BlackRock and its iShares Bitcoin Trust ETF (IBIT) or Fidelity and its Wise Origin Bitcoin Fund ETF (FBTC). Both come with 0.25% expense ratios.

“You should also look at the liquidity of the ETF, how often is it traded, and whether it is trading at discount to NAV, at premium, or at par,” Schwenk says. (Full disclosure: His firm acts as price provider for BlackRock’s fund, providing input information for the investment valuation.)

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