The Cheapest Bitcoin ETF Fund and How to Make Smart Choices to Reduce Costs

Bitcoin ETFs have significantly expanded the ways investors can access BTC, especially after spot funds were officially approved by regulators. However, when choosing a Bitcoin ETF, management fees are a key factor that will directly impact your returns, particularly for long-term investments.

Spot Bitcoin ETF vs. Futures-Based ETF: Cost Duel

Starting in 2024, the Bitcoin ETF market has split into two main types: physically-backed spot funds holding actual Bitcoin and futures-based funds.

Spot Bitcoin ETFs – these funds hold actual Bitcoin and allow investors to directly experience BTC price fluctuations. This newer form has recently gained regulatory approval, offering considerably lower fees.

Futures Bitcoin ETFs – these funds invest in futures contracts rather than actual Bitcoin. They tend to have longer track records but usually charge higher fees due to more complex structures.

Fee differences are crucial — with a $10,000 investment and a 10% annual return, a fund with a 0.25% fee will net about $800 more profit over 10 years than a fund charging 1%.

Top Low-Cost Bitcoin ETFs in the U.S.

Below are the cheapest approved Bitcoin ETFs in the U.S., ranked by expense ratio:

Ultra-Low Fee Funds (0.12% – 0.25%)

iShares Bitcoin Trust (IBIT) – BlackRock – 0.25% (after first year)
A product of BlackRock, the world’s largest asset manager, traded on NASDAQ. IBIT offers a super-low-cost option, with a fee of just 0.12% in the first year or with $5 billion in assets, then rising to 0.25%. It has become a top choice for cost-conscious investors.

Fidelity Wise Origin Bitcoin Trust (FBTC) – 0.35% (free until July 2024)
Fidelity, a major financial firm with extensive investment experience, offers FBTC at 0.35% on CBOE. It’s free until July 31, 2024, providing a great opportunity for investors to try it out without costs.

Bitwise Bitcoin ETP Trust (BITB) – 0.40% (free for first 6 months)
Bitwise’s fund trades on NYSE Arca with a 0.40% fee but is fee-free or until reaching $1 billion in assets, whichever comes first. BITB stands out for physically-backed Bitcoin holdings with high security standards.

Moderate Fee Funds (0.40% – 0.70%)

Invesco Galaxy Bitcoin ETF (BTCO) – 0.39% (free for first 6 months)
A partnership between Invesco and Galaxy Digital, trading on CBOE with a 0.39% fee, free for the first 6 months or until $5 billion in assets. It’s a solid second choice for cost-effective options supported by industry strong partners.

WisdomTree Bitcoin Trust (BTCW) – 0.45%
From WisdomTree, trading on CBOE with a 0.45% fee, free for 6 months or until $1 billion in assets. BTCW offers broad risk management and appeals to institutional investors.

Franklin Bitcoin ETF (EZBC) – 0.40%
From Franklin Templeton, one of the oldest global investment firms, EZBC trades on CBOE with a 0.40% fee. It’s not free but provides the reliability of an established financial organization.

ARK 21Shares Bitcoin ETF (ARKB) – 0.21% (free first 6 months)
ARK Invest’s ARKB trades on CBOE with a 0.21% fee, free for the first 6 months or until reaching $1 billion in assets. It combines Bitcoin with related tech companies, suitable for those seeking broader exposure.

VanEck Bitcoin Trust (HODL) – 0.25%
VanEck offers HODL on CBOE with a 0.25% fee, focusing on a “HODLing” strategy with low operational costs.

Higher-Cost Funds – To Avoid

Grayscale Bitcoin Trust (GBTC) – 1.5% – 2%
GBTC is the oldest, transitioning from a trust to an ETF. With fees up to 1.5-2%, it’s the most expensive on the market. Despite being the largest Bitcoin investment vehicle, new investors should avoid it due to high costs.

Hashdex Bitcoin ETF (DEFI) – 0.90%
Listed on NYSE Arca with a 0.90% fee, higher than other options, targeting DeFi-Bitcoin crossover.

ProShares Bitcoin Strategy ETF (BITO) – 0.95%
An older futures-based ETF, charging 0.95%. It’s not a spot Bitcoin ETF but a more complex futures vehicle.

Global Bitcoin ETFs with Reasonable Fees

Beyond the U.S., some markets offer competitively priced Bitcoin ETFs:

Canada:

• Purpose Bitcoin ETF (BTCC) on TSX – 0.70% – holds actual Bitcoin
• Evolve Bitcoin ETF (EBIT) on TSX – 0.75% – tracks daily Bitcoin price movements

Europe:

• Jacobi FT Wilshire Bitcoin ETF (BCOIN) on Euronext Amsterdam – 0.45% – holds actual Bitcoin, providing European access at reasonable costs

How Fees Impact Long-Term Returns

To understand fee effects, consider this example:

Investing $50,000 in a Bitcoin ETF with an average annual return of 12% over 20 years:

• IBIT (0.25%): Estimated net profit: over $600,000
• FBTC (0.35%): Estimated net profit: over $595,000
• GBTC (1.5%): Estimated net profit: over $500,000

The difference between the cheapest and most expensive fund can be up to $100,000 — a strong reason to choose low-fee funds from the start.

How to Pick the Cheapest Bitcoin ETF That Fits You

Step 1: Compare Fees Holistically

Don’t just look at the nominal expense ratio. Consider:

• Total Expense Ratio (TER)
• Trading commissions when buying/selling
• Hidden costs related to index tracking

Step 2: Review Historical Performance

The cheapest fund isn’t always the best if it poorly tracks Bitcoin’s price. Compare performance over 1, 3, or more years.

Step 3: Check Liquidity and Trading Volume

Funds with high trading volume are easier to buy/sell without large bid-ask spreads. IBIT and FBTC are highly liquid.

Step 4: Confirm Your Trading Platform Supports the ETF

Not all platforms offer access to all Bitcoin ETFs. Major platforms like Fidelity, Charles Schwab, and E-Trade provide access to most.

Step 5: Verify Fund Structure

Ensure the fund holds actual Bitcoin (spot-backed) unless you specifically want exposure to futures.

How to Buy the Cheapest Bitcoin ETF

Method 1: Use Low-Cost Online Brokers

Platforms like Fidelity, Charles Schwab, and TD Ameritrade offer:

• Commission-free trading on Bitcoin ETFs
• Automatic investment plans
• Simplified accumulation of Bitcoin ETF

Method 2: Use Low-Fee Trading Apps

Apps like Robinhood, Webull, or M1 Finance provide:

• Lower transaction costs
• User-friendly interfaces
• Automated investing features

Method 3: Use Robo-Advisors

Platforms like Betterment or Wealthfront can help you:

• Build optimized portfolios
• Automate rebalancing
• Minimize total costs with tax-efficient strategies

Comparing: Cheapest Bitcoin ETF vs. Other Options

Holding Bitcoin Directly:

• Pros: Direct ownership, no management fees
• Cons: Security complexity, theft risk, no regulation protection

Trading Bitcoin:

• Pros: Potential for high short-term gains
• Cons: High transaction costs, large risk of loss, requires active management

Cheapest Bitcoin ETF:

• Pros: Low costs, regulated, accessible, high liquidity
• Cons: Returns affected by fees, indirect ownership

Important Tips When Choosing the Cheapest Bitcoin ETF

Don’t Just Focus on Fees:
The lowest-fee fund isn’t always the best if it poorly tracks Bitcoin or has low performance.

Check for Fee Waivers:
Many new funds offer fee waivers for 6 months or until a certain asset level. Confirm the duration.

Assess Fund Risks:
Different funds carry varying risk levels based on structure and strategy.

Verify Issuer Credibility:
Funds from reputable firms like BlackRock, Fidelity, and ARK tend to have better track records.

Review Regularly:
The Bitcoin ETF market is evolving. Periodically check for new, cheaper options or better-performing funds.

Conclusion

The approval of spot Bitcoin ETFs has created a great opportunity for investors seeking low-cost, regulated exposure to BTC. With fees ranging from 0.12% to 0.25% for the cheapest options like IBIT, FBTC, and ARKB, you can significantly reduce the impact of costs on your long-term gains.

When choosing the cheapest Bitcoin ETF, consider not only fees but also performance, liquidity, issuer reliability, and how well it fits your investment goals. By investing wisely and selecting funds with optimal costs, you can maximize Bitcoin’s growth potential while minimizing expenses. Currently, with Bitcoin around $68,000, now is a good time to consider low-cost Bitcoin ETFs as part of your long-term investment strategy.