FBTC vs. GBTC: Which Bitcoin ETF Should You Buy In 2024? (2024)

Investing

Since the start, FBTC (Fidelity Wise Origin Bitcoin Fund) and GBTC (Grayscale Bitcoin Trust) have held the #2 and #3 AUMs for spot Bitcoin ETFs since the jump. FBTC orGBTC? Which should youbuy?

This article delves into acomprehensive comparison ofFBTC and GBTC, aiming toprovide clear insights for both seasoned and novice investors.

We’ll explore their distinct characteristics, benefits, performance, fees, and drawbacks, focusing onhow spot Bitcoin ETFs fit into the broader context ofBitcoin investmentstrategies.

TL; DR: FBTC, the Fidelity Wise Origin Bitcoin Fund, offers exposure toBitcoin through direct holdings ofBitcoin. GBTC, the Grayscale suits investors seeking exposure toBitcoin’s price movements despite potentially higher costs and the risk oftrading atpremiums ordiscounts.

Quick Comparison: FBTC vs. GBTC

FBTC

• Name: Fidelity Bitcoin Trust (FBTC)

• Issuer: Fidelity Investments

• Type: Bitcoin Trust

• Custody: Self-custody

• Launch Date: 2021

• Objective: Totrack the price ofBitcoin byinvesting inBitcoindirectly.

• Management: Actively managed byFidelity’s experiencedteam.

• Investment Strategy: Purchase and hold Bitcoin toprovide exposure toits pricemovements.

GBTC

• Name: Grayscale Bitcoin Trust (GBTC)

• Issuer: Grayscale Investments

• Type: Bitcoin Trust

• Custody: Coinbase Custody

• Launch Date: 2013

• Objective: Toprovide investors with acost-effective and convenient way togain exposure toBitcoin.

• Management: Passively managed

• Investment Strategy: Purchase and hold Bitcoin tomirror Bitcoin’s price performance.

Key Comparisons: Fees and Performance

Fees

• FBTC: Management fee of0.40% per annum

• GBTC: Management fee of2.00% per annum

Fidelity Wise Origin Bitcoin Fund (FBTC)

The Fidelity Wise Origin Bitcoin Fund primarily allocates its investments toholding actual Bitcoin instead ofinvesting inBitcoin futurescontracts. FBTC offers adirect exposure method toBitcoin and isdesigned toprovide investors with anopportunity togain exposure tothe price ofBitcoin through afamiliar investmentvehicle.

FBTC Overview

Pros

• Ease ofAccess: Provides astraightforward way for traditional investors togain exposure toBitcoin without needing tomanage digital wallets ornavigate cryptocurrencyexchanges.

• Regulated Product: Managed byFidelity, FBTC issubject toregulatory oversight, providing transparency and investorprotection.

• Diversification: Allows investors toinclude Bitcoin intheir diversified investment portfolios through afamiliar financialinstrument.

• Secure Custody: The fund’s Bitcoin isstored with secure custodians, reducing the risk associated with individual cryptocurrencystorage.

• Liquidity: Shares ofFBTC are traded ontraditional stock exchanges, providing liquidity and ease ofbuying andselling.

Cons

• Management Fees: FBTC charges management fees, which can reduce overall returns compared toholding Bitcoindirectly.

• Tracking Errors: FBTC’s performance may not perfectly match Bitcoin’s due tofees and marketconditions.

• Limited Control: Investors donot have direct control over the Bitcoin held bythe fund, which can beadrawback for those who prefer tomanage their cryptocurrencyholdings.

• Regulatory Risks: Regulation changes could impact the fund’s operations orability toholdBitcoin.

• Market Risk: Aswith any investment inBitcoin, FBTC issubject tothe volatility and market risks associated with the cryptocurrency.

• Potential Premiums: The share price ofFBTC may trade atapremium ordiscount tothe net asset value (NAV) ofthe Bitcoin held bythe fund, potentially affecting investmentreturns.

NAV asofJuly 18th, 2024

• $56.38

Sponsor Fee

• 0.25% (starting August 1, 2024)​ (Fidelity)​​ (ETF.com)​

GBTC (Grayscale Bitcoin Trust): AnOverview

GBTC was one ofthe first spot Bitcoin ETFs inthe U.S. Itissolely and passively invested inBitcoin. Its shares are designed toreflect the value ofBTC held bythe Trust, determined byreference tothe Index Price, less the Trust’s expenses and other liabilities.

GBTC allows investors togain exposure toBitcoin through afamiliar investment vehicle without setting upanaccount orwallet onacryptocurrency trading platform.

Similar tohow investors use ETFs tohold other commodities, like gold orsilver, they can now invest inBitcoin through GBTC.

• GBTC owns and passively holds actual Bitcoins through their Custodian, Coinbase Custody.

• GBTC does not trade, buy, sell, orhold Bitcoin derivatives, including Bitcoin futurescontracts.

Despite all ofGBTC’s competitors lowering their spot Bitcoin ETF fees just before the SEC approved 11 spot Bitcoin ETFs, GBTC notably did not.

Wehave acomplete overview ofall spot Bitcoin ETF fee products. Best Bitcoin ETF Fees: Lowest toHighest (July 2024)

GBTC Overview

Pros

• Direct Exposure toBitcoin: GBTC holds actual Bitcoin, directly exposing its pricemovements.

• Simplicity: It’s astraightforward way for investors togain exposure toBitcoin without the complexities ofmanaging Bitcoin wallets andkeys.

• Traditional Investment Vehicle: Asatrust, itcan beheld incertain tax-advantaged accounts, likeIRAs.

Cons

• Higher Fees: GBTC typically has ahigher fee structure due tothe costs ofsecurely holding physicalBitcoin. Grayscale has byfar the highest Bitcoin ETF fee (1.50%) ofany approved BitcoinETF.

• Premiums orDiscounts: GBTC can trade atsignificant premiums ordiscounts tothe underlying Bitcoin price, affecting investmentvalue.

• Less Liquidity: Being anOTC product, itlacks the same level ofliquidity asastandardETF.

• ETF Conversion Risk: May beforced to“sell & rebuy” Bitcoin aspart ofthe ETF conversion process and may involve capital gainstaxes.

How toInvest inGBTC

Grayscale Bitcoin Trust ETF (Ticker: GBTC) trades onNYSE Arca and isavailable through your brokerageaccount.

FBTC vs. GBTC Comparison: Fees and Performance

Performance Metrics

• FBTC’s performance istied directly tothe spot price ofBitcoin, providing amore direct correlation with Bitcoin’s worth.

• GBTC’s performance isalso correlated with Bitcoin’s price but issubject topremiums ordiscounts based onmarket demand for theshares.

Fees Impact

• FBTC has acompetitive fee structure that isattractive for cost-conscious investors.

• GBTC’s higher fees cater tothe Trust’s direct exposure toBitcoin and additional securitymeasures.

Spot Bitcoin ETF Fees and Holdings (AsofJuly 26th, 2024)

Fidelity Wise Origin Bitcoin Trust (FBTC)

• Fee: 0.25% (0% fee waived until Aug. 1, 2024)

• BTC Holdings: 181,087 BTC inself-custody

• More Information

Grayscale Bitcoin Trust (GBTC)

• Fee: 1.5%

• BTC Holdings: 270,770 BTC with Coinbase

• Held 619K Bitcoin onlaunch

• More Information

Grayscale Bitcoin Mini Trust

• Fee: 0.15%

• GBTC: 10% ofGrayscale Bitcoin Trust (GBTC)— assets invested inthe Bitcoin Mini Trust (BTC)

• More Information

Net Bitcoin ETF Inflows

Total Volume: $1.67B

Total Marketcap: $61.25B

Total AUM: $52.14B

Last Update:July 26, 2024— 1:56 PMUTC

Bitcoin ETF fee information isupdateddaily. For the latest updates, click here.

Q1 Spot Bitcoin ETF Key Takeaways

• The initial three months oftrading for spot Bitcoin ETFs have ended, with the eleven offerings approved bythe SEC collectively attracting about $12.1 billion ininflows.

• Blackrock’s IBIT has emerged asthe leading beneficiary, securing $13.9 billion inflows since itstarted trading inJanuary.

• IBIT isthe fastest growing ETF inthe history ofETFs.

• OnMarch 27th, BlackRock CEO Larry Fink appeared onFox Business todiscuss the wild success ofits spot Bitcoin ETF product, IBIT. Fink’s spot Bitcoin ETF comments begin atthe 10 minute, 15 secondmark.

• More than 30 Bitcoin ETFs collectively owned 1,002,343 BTC asofMay24.

• BlackRock (IBIT) became the fastest ETF toreach $20B— added Bitcoin toits Strategic Income and Strategic Global BondFunds.

• BlackRock’s iShares Bitcoin Trust has become the world’s largest Bitcoin fund, amassing nearly $20 billion inassets since its U.S. listing inJanuary.

Bitcoin ETF Disclosure’s

• Millennium Management

  • Total investment: $1.9 billion

  • $844.2 million inBlackRock’s iShares Bitcoin Trust (IBIT)

  • $806.7 million inFidelity’s Wise Origin Bitcoin Fund (FBTC)

  • $202 million inGrayscale Bitcoin Trust (GBTC)

  • $45.0 million inARK 21Shares Bitcoin ETF (ARKB)

  • $44.7 million inBitwise Bitcoin ETF (BITB)

• Schonfeld Strategic Advisors

  • Manages $13 billion inassets

  • $248 million inBlackRock’s ETF

  • $231.8 million inFidelity’s fund

  • Total investment: $479 million

• Susquehanna International Group

  • Total investment: +$1.8 billion

• Morgan Stanley

  • $269.9 million inGBTC

• Aristeia Capital

  • $163.4 million inIBIT

• Wisconsin Investment Board

  • $162 million inIBIT, GBTC

• Other major investors

  • JPMorgan

  • Wells Fargo

  • UBS

  • BNP Paribas

  • Royal Bank ofCanada

Additional Investment Considerations

When deciding between FBTC and GBTC, several factors must beconsidered todetermine which investment vehicle best suits your needs and investmentstrategy.

Management Fees

• FBTC: Understand the management fee FBTC charges and how itimpacts your overallreturns.

• GBTC: Compare the fees associated with GBTC, which are oftenhigher. Higher fees can erode your returns, especially ifyou plan along-terminvestment.

Tracking Performance

• FBTC: Evaluate how closely FBTC tracks the price ofBitcoin. Consider any potential tracking errors and how they might affect yourinvestment.

• GBTC: Assess GBTC’s historical performance about Bitcoin’sprice. GBTC has sometimes traded atsignificant premiums ordiscounts toits net asset value (NAV).

Liquidity and Trading

• FBTC: Check the liquidity ofFBTC shares and how easily they can bebought orsold ontraditional stockexchanges. Higher liquidity generally means easiertrading.

• GBTC: Consider the liquidity ofGBTC shares, which canvary. Understanding market demand and trading volumes can help you plan your entry and exitstrategies.

Custody and Security

• FBTC: Review the security measures and custodial arrangements for the Bitcoin held byFBTC. Secure custody iscrucial toprotect yourinvestment.

• GBTC: Investigate GBTC’s custodial practices toensure your assets are safely stored and protected against potential securitythreats.

Regulatory Environment

• FBTC: Consider the regulatory framework governing FBTC, including any recent changes oranticipated regulations that could impact thefund.

• GBTC: Examine the regulatory landscape for GBTC and how itcomplies with existing regulations. Regulatory clarity can provide investors with peace ofmind.

Market Sentiment and Premiums

• FBTC: Beaware ofhow FBTC’s share price may betraded about itsNAV. Market sentiment can influence whether FBTC trades atapremium ordiscount.

• GBTC: Historically, GBTC has experienced significant premiums anddiscounts. Understanding these market dynamics can help you make informed decisions about timing your investments.

Bycarefully evaluating these factors, you can decide whether FBTC orGBTC isthe right choice for your Bitcoin investmentneeds.

Conclusion: FBTC vs. GBTC

This guide was designed tohelp investors navigate the complex landscape ofBitcoin ETFs, providing insights into the unique characteristics, benefits, and drawbacks ofFBTC and GBTC.

FBTC and GBTC cater todifferent investor needs and risk appetites…

• FBTC ispreferable for those seeking anETF structure with competitive fees and direct exposure toBitcoin.

• GBTC suits investors seeking exposure toBitcoin’s price movements despite potentially higher costs and the risk oftrading atpremiums ordiscounts.

With all the complexities and downsides, isthere agreat alternative toFBTC and GBTC?

YES!

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For more information onFBTC and GBTC, you can visit their respective pages onFidelity and Grayscale​ (Fidelity)​​ (Stock Analysis)​​ (ETF.com)​.