The Race is On: Top 10 Companies Competing to Launch the First Bitcoin Spot ETF in the USA
Jan 2, 2024
The possibility of a Bitcoin spot exchange-traded fund (ETF) being approved in the United States has generated massive excitement in the crypto community. A spot ETF would allow mainstream investors easy access to Bitcoin without having to directly handle the cryptocurrency. Currently, the SEC has rejected all applications for spot ETFs, only approving funds based on Bitcoin futures contracts. However, optimism is growing that 2024 could finally be the year a spot ETF is greenlit.
This optimism stems from several major traditional asset managers filing for spot ETFs in June 2023. The filings started with BlackRock, the world's largest asset manager, followed by several other giants like Fidelity and Galaxy. With powerhouses like BlackRock pushing for approval, many believe the SEC will finally give in.
Below, we look at the top 10 contenders applying for approval of a Bitcoin spot ETF in the USA.
1. Ark Invest + 21Shares
Total Assets Under Management: $8 billion
ETF Name: ARK 21Shares Bitcoin ETF (ARKB)
Date Filed: June 2021
ARK Invest, led by crypto proponent Cathie Wood, is aiming to launch a spot Bitcoin ETF in partnership with Swiss asset manager 21Shares. This is ARK's third attempt after two rejections. 21Shares currently has an exchange-traded product for Bitcoin in Switzerland.
ARK believes Bitcoin could reach $1 million per coin by 2030. Thus, Cathie is highly motivated to make a spot ETF a reality. ARK Invest is also one of the first to disclose fund fee details. The ETF plans to charge 0.95%, lower than competitors but higher than other ARK ETF fees. The fund would trade on the Cboe BZX Exchange. It also plans to utilize Coinbase as the custodian. ARK resubmitted its S-1 filing shortly after BlackRock to incorporate the same structure and is still waiting on approval.
Total Assets Under Management: $10 trillion
ETF Name: iShares Bitcoin Trust (IBTC)
Date Filed: June 2023
BlackRock kicked off the spot ETF race when it submitted its S-1 filing in mid-June 2023. This came as a surprise to many, as CEO Larry Fink had been a noted Bitcoin skeptic in the past. However, BlackRock has since changed its tune on crypto.The world's largest asset manager plans to list its spot ETF on the NASDAQ under the ticker IBTC. Coinbase is currently listed as the proposed Bitcoin custodian for the ETF. BlackRock has already worked with Coinbase in the past connecting their institutional platform Aladdin last year to Coinbase Prime for trading and custody.
Many believe BlackRock has the best chance of getting SEC approval. The firm has extensive regulatory experience and influence that weaker applicants lack. Its use of Coinbase for custody and surveillance also addresses the SEC's concerns about potential manipulation. If approved, the backing of BlackRock could significantly boost Bitcoin's credibility with institutional investors.
Total Assets Under Management: $1 billion
ETF Name: Bitwise Bitcoin ETF Trust (BITW)
Date Filed: October 2021
Bitwise is a leader in crypto index funds. It has applied for several crypto ETFs in recent years, including for large cap coins (BTC, ETH) and a DeFi Index. However, like most Bitcoin ETF applicants, it has faced rejection from the SEC. In June 2023, Bitwise filed an amendment to its latest filing to address the SEC's concerns around potential manipulation..
Total Assets Under Management: $4.5 trillion
ETF Name: Wise Origin Bitcoin Trust (FBTC)
Date Filed: March 2021
Fidelity jumped into the race just days after BlackRock filed its application. It amended a previous filing from 2021 to copy BlackRock's proposal. This includes using Coinbase as the custodian and basing the NAV on Coinbase's crypto pricing data.
The Wise Origin Bitcoin Trust would likely trade under a ticker close to "FBTC" which is their current ticket for the Canadian-approved Fidelity Bitcoin ETF. As one of the largest asset managers worldwide, Fidelity could attract significant institutional interest to its Bitcoin ETF. Its reputation with conservative investors is unmatched by crypto-native contenders.
5. Franklin Templeton
Total Assets Under Management: $1.53 trillion
ETF Name: Franklin Templeton Digital Holdings Trust
Date Filed: September 2023
Franklin Templeton is the latest company to file for a Bitcoin ETF. This is in stark contrast to previous remarks from Jenny Johnson, CEO of Franklin Templeton, stating "Bitcoin is the greatest distraction from the greatest disruption in financial services, which is blockchain".
According to the filing Coinbase will act as the custodian of Bitcoin held by the fund, similar to Blackrocks filing. The ETF will also be traded on Cboe BZX Exchange and will use the CME's CF Bitcoin Reference Rate–New York Variant for pricing.
6. Galaxy Digital + Invesco
Total Assets Under Management: $1.5 trillion
ETF Name: Invesco Galaxy Bitcoin ETF (BTCO)
Date Filed: September 2021
Galaxy Digital is an investment firm focused exclusively on the crypto and blockchain space. Invesco, on the other hand, is a global independent investment firm managing over $1.5 trillion in assets.
Galaxy Digital partnered with giant asset manager Invesco on a spot Bitcoin ETF first proposed in 2021. However, they withdrew the initial application after the SEC stalled on approvals. Following BlackRock's new application, Galaxy Digital and Invesco quickly amended and re-filed their proposal. The new filing adopts the same format of utilizing a regulated crypto exchange for custodial.
Total Assets Under Management: $24 billion
ETF Name: Grayscale Bitcoin Trust (GBTC)
Date Filed: 2017
Grayscale's Bitcoin Trust (GBTC) is not technically an ETF yet but operates similarly. Since 2017, Grayscale has sought to convert the popular GBTC into an SEC-approved ETF to expand its reach to traditional brokerages. GBTC has faced several rejections from the SEC over the years. Its latest attempt was blocked in 2018 alongside several other applicants.
Total Assets Under Management: $1 billion
ETF Name: Valkyrie Bitcoin Trust (BRRR)
Date Filed: January 2021
Valkyrie is an asset manager focused on bridging traditional finance with digital assets. It offers funds focused on cryptocurrency miners and decentralized finance (DeFi) platforms.
Valkyrie has already achieved one crypto ETF approval for their Bitcoin and Ether Strategy ETF which invests in futures contracts (Not a spot ETF). In October 2021, it launched the first Bitcoin futures ETF under the ticker BTF. This was shortly before similar futures ETFs from ProShares and other giants were also approved.
Total Assets Under Management: $75 billion
ETF Name: VanEck Bitcoin Trust (HODL)
Date Filed: December 2020
Investment management firm VanEck has been trying unsuccessfully to launch a Bitcoin ETF since 2018. After two rejections, it filed again in June 2023 following BlackRock. Its latest filing puts safeguards in place against fraud and manipulation to satisfy SEC concerns. VanEck has partnered with regulated crypto exchange CME Group to utilize its pricing data.
VanEck currently offers a few crypto investment vehicles, including a Bitcoin futures mutual fund and an ETN based on crypto mining stocks. However, the asset manager remains eager to unleash the greater potential of a spot Bitcoin ETF. The VanEck Bitcoin Trust would trade on the Cboe exchange with the ticker "XBT".
Total Assets Under Management: $90 billion
ETF Name: WisdomTree Bitcoin Trust (BTCW)
Date Filed: December 2021
WisdomTree has significant crypto ETF experience compared to other legacy players awaiting approval. It already offers a regulated Bitcoin ETF in Europe, which launched in June 2021 “BTCW”.WisdomTree has had all of its applications so far rejected. WisdomTree resubmitted its filing shortly after BlackRock in June 2023.
The latest application adopts similar tactics as BlackRock, such as utilizing regulated exchanges for surveillance and custody. The ETF would trade under the ticker "BTCW" on the Cboe BZX Exchange. As an established ETF issuer, WisdomTree could gain an advantage over less traditional crypto ETF providers in the eyes of the SEC.
The Outlook for a Bitcoin Spot ETF in the USA
After years of rejection, the prospect of the first spot Bitcoin ETF approval is growing. Much depends on how the SEC ultimately responds to the recent pressure from Wall Street giants like BlackRock, Fidelity, and Invesco.
Here are some key advantages a spot ETF would offer American investors:
Easy exposure to Bitcoin without dealing with wallets and storage
Trading on regulated mainstream platforms like NYSE and Nasdaq
Strict controls against fraud and manipulation
Legitimacy to attract conservative institutional investors
Of course, there remains the possibility that the SEC rejects or postpones all applications once again. However, the momentum and serious applicants make 2024 look more favorable than ever.Many expect an approval could trigger an influx of institutional capital and send Bitcoin past its former all-time highs.
It would also pave the way for further crypto adoption in the USA. Even if the SEC shoots down a spot ETF once again, the massive demand makes it seem inevitable in the longer term. The benefits over the current futures ETF model are too substantial.
Ultimately, it's not a matter of if, but when. The impact of the world's first Bitcoin spot ETF being approved in the United States would send shockwaves through the entire crypto industry.
Why Previous Spot ETF Attempts Failed
The SEC has rejected over a dozen spot Bitcoin ETF applications since 2018. Here are some of the key concerns cited:
What Changed to Improve Chances?
Here are some key developments that make a Bitcoin ETF more viable than during previous failed attempts:
Mainstream corporate adoption of Bitcoin as "digital gold"
Improved market structure and surveillance on major crypto exchanges
Advancements in secured crypto custody solutions mainly from Coinbase
Growth of Bitcoin futures and options markets aiding price discovery
Major traditional finance players applying pressure for approval
Legal wins questioning the SEC's authority to block filings
Which Firms are Best Positioned?
With at least 10 serious contenders applying, the competition is fierce to launch America's first spot Bitcoin ETF. Based on their regulatory track record and approach, certain applicants seem better positioned. The tier 1s have brand recognition and deep pockets make them hardest for the SEC to ignore.
The Positives of Bitcoin ETFs
1. Easy and Secure Exposure to Bitcoin
For investors who are interested in gaining exposure to Bitcoin but don't want to deal with buying and securing the cryptocurrency themselves, a Bitcoin ETF offers an easy solution. The ETF provider handles all of the Bitcoin storage and security, while the investor simply buys shares of the ETF. This makes investing in Bitcoin as easy as buying any stock or ETF.
2. Lower Cost Than Buying Bitcoin Directly
Buying Bitcoin directly can be expensive due to exchange fees, network transaction fees, and wallet fees. Bitcoin ETFs have much lower management fees, usually around 1%, allowing investors to gain exposure to Bitcoin at a fraction of the cost.
3. Tax Efficiency
Bitcoin is subject to capital gains taxes whenever it is sold at a profit. With a Bitcoin ETF, the fund manager handles all of the buying and selling of the underlying Bitcoin, so investors only have to pay taxes when they sell their shares of the ETF. This can result in greater tax efficiency.
4. Accessibility to Retirement & Investment Accounts
Many retirement accounts such as 401(k)s, IRAs do not allow direct investment in cryptocurrencies. However, since Bitcoin ETFs are structured as traditional exchange-traded funds, they can be easily included in these types of accounts. This gives a greater number of investors access to Bitcoin exposure through funds they already own.
5. Regulation and Security
As ETFs, Bitcoin ETFs are regulated by the SEC and must follow strict reporting and compliance rules. This provides an extra layer of security and oversight compared to buying Bitcoin directly. Investors have peace of mind knowing the ETF sponsor is operating within regulatory guidelines.
The Negatives of Bitcoin ETFs
1. Management fees
ETFs charge management fees for the convenience they provide. Owning a significant amount of shares in a bitcoin ETF could lead to high management fees over time.
2. Lack of Bitcoin ownership
Bitcoin serves as a hedge against central banks, fiat currencies, and equities. A bitcoin ETF would be regulated by the government, eliminating these benefits.
3. Ideological deviation from Bitcoin’s core principles
Bitcoin ETFs may contradict Bitcoin’s ethos of financial autonomy and self-custody. Investors in ETFs do not need to understand or engage with the Bitcoin system, potentially reducing overall engagement and knowledge about the cryptocurrency.
4. Reduced engagement with on-chain projects
By making investment in Bitcoin more accessible and less hands-on, ETFs might reduce active participation in the Bitcoin community, which is vital for the health and development of the network.
5. Temporary Price Suppression Risk
The sale of paper Bitcoin by ETFs might initially suppress Bitcoin's price. However, if investors notice this, it could lead to a 'bank run' on Bitcoin ETFs. Since Bitcoin is easier and cheaper to store than precious metals, this could prompt a shift from ETF-based Bitcoin to actual Bitcoin, potentially increasing the price of real Bitcoin while diminishing the value of paper Bitcoin, possibly to zero.
Which Countries Already Have Bitcoin Spot ETFs?
While the United States has yet to approve a spot Bitcoin ETF, several other countries are ahead of the curve and offer investors easy access to Bitcoin funds.
Canada - The first Bitcoin ETFs were launched in Canada in early 2021 by Purpose Investments and Evolve Funds. Several other issuers have since launched Bitcoin ETFs in Canada as well.
Brazil - Latin America's largest country approved its first Bitcoin ETF called QBTC in 2021. It trades on the Brazilian stock exchange.
Germany - Launched Bitcoin Exchange Traded Crypto (BTCE) in 2020 on the Deutsche Borse XETRA exchange.
The widespread adoption of Bitcoin ETFs across developed and emerging economies makes the United States seem archaic in its refusal to allow similar products. With other nations reaping the benefits, pressure is mounting on the SEC to unleash crypto ETFs in the U.S. market.
After years of futility and dozens of rejections, optimism is growing that 2024 may finally be the year it happens. With powerhouse backing from BlackRock and others, the SEC is facing unprecedented pressure that could lead to a policy reversal.
The benefits of a spot Bitcoin ETF would be tremendous for mainstream adoption in the US. It would allow everyday investors exposure through their existing brokers. It would also allay fears of fraud that persist around owning cryptocurrencies directly. Institutions could significantly ramp up exposure as well.
While the SEC could still block all applications, the sheer demand makes approval seem inevitable long term. All eyes are on how they respond to heavyweights like BlackRock, Fidelity and Ark Invest pushing hard in 2022. An approval would further legitimize Bitcoin as an asset class and could send prices soaring to new highs. After a slow start, the US stands ready to be a leader in crypto ETFs