On February 11, 2021, Canada became the first and only nation in North America to permit the launch of a new financial investment product.
Investing in Bitcoin ETFs has become increasingly popular in recent years, as more people seek exposure to the world’s leading cryptocurrency. Canada, in particular, has been at the forefront of this trend, with several Bitcoin ETFs launching in the country over the past few years. But with so many options available, how do you determine which Bitcoin ETF is the best fit for your investment portfolio? In this article, we’ll take a closer look at some of the top Bitcoin ETFs in Canada and what sets them apart.
These are exchange traded funds, also known as ETF, but instead of being indexed to the value of different stocks or other commodities like precious metals or art and collectibles, they are linked to the value of the bitcoin cryptocurrency.
What is cryptocurrency?
The purpose of cryptocurrency is to give people back control over their own money. It was intended to be a method for users to send and receive virtual currency from anywhere in the world.
Without relying on a centralised entity like banks, it is purchased, sold, utilised, and traded. Although cryptocurrency can be used to make payments, it is frequently kept as an investment. Cryptography is used to safeguard it, helping to ensure that there is no danger of counterfeiting.
What is ETF?
It’s important to understand what is ETF is before moving on Bitcoin ETF. Exchange-traded fund is referred to as an ETF. It’s a pooled investment that operates somewhat differently than a mutual fund. They enable investors to make multiple stock and bond purchases simultaneously.
They frequently follow a particular sector or index, but unlike mutual funds, they can be purchased, sold, and traded on an exchange just like any other common stock. Even though their prices vary constantly like stocks do, ETFs are actually a collection of diverse securities which often means it is less risky to invest in ETFs than individual stocks.
What is a Bitcoin ETF?
Exchange-traded funds (ETFs) that track the price of Bitcoin trade on conventional stock exchanges as opposed to cryptocurrency exchanges. They give its price leverage while enabling investors to invest in Bitcoin without having to deal with the hassle of using a cryptocurrency exchange.
What is the difference between a Bitcoin ETF and Bitcoin?
A Bitcoin ETF is an exchange-traded fund that tracks the value of Bitcoin currency owned by the fund in question. Bitcoin is a digital currency with real value that is created by solving challenging computational challenges on the blockchain. A Bitcoin ETF tracks the index value of Bitcoin as a traded commodity and digital asset, as opposed to standard ETFs that track the indexed value of equities, bonds, or commodities on the market.
Advantages of Bitcoin ETFs
1. Easy to buy
Exchange-traded funds (ETFs) that track the price of Bitcoin trade on conventional stock exchanges as opposed to cryptocurrency exchanges. They give its price leverage while enabling investors to invest in Bitcoin without having to deal with the hassle of using a cryptocurrency exchange.
2. Diversification
More than one asset may be held by an ETF. For instance, a Bitcoin ETF might include Bitcoin, Apple, Facebook, and other companies, giving investors the chance to diversify their holdings and reduce risk. Similar to that, a Bitcoin ETF would give investors the opportunity to diversify their current equities portfolios by trading on a regulated market exchange.
3. Tax efficiency
The majority of tax havens and pension funds throughout the world do not permit the purchase of Bitcoin due to its decentralised nature and lack of regulation. On the other hand, a Bitcoin ETF that traded on conventional exchanges would probably be subject to SEC regulation and qualify for tax benefits.
Disadvantages of Bitcoin ETFs
1. Management fees
ETFs typically levy management fees in exchange for the convenience they offer. As a result, holding a sizable number of shares in a Bitcoin ETF may eventually result in expensive management costs.
2.ETF tracking error
ETFs have the ability to hold a variety of assets in an effort to diversify the portfolio, even though they track the price of the underlying asset. This, however, shows that the exchange-traded fund’s value may not truly reflect a 50% increase in Bitcoin’s price due to its other assets. Therefore, while an ETF gives the price of Bitcoin leverage, it may or may not be a reliable price tracker.
3. Limits to cryptocurrency trading
Other cryptocurrencies like Ethereum, Litecoin, XRP, and others can be exchanged for bitcoin. Since a Bitcoin ETF is merely an investment fund that monitors the price of Bitcoin rather than a cryptocurrency, it would not be permitted to trade for other cryptocurrencies.
How Do You Purchase Bitcoin ETF?
If your brokerage firm offers them, you can purchase bitcoin ETFs through your broker or financial advisor.
Bitcoin futures and Bitcoin spot ETF
An ETF that represents the value of a cryptocurrency and allows you to buy or sell it depending on contract terms is known as a futures ETF. When you buy or sell futures, you do not, however, become the owner of the underlying cryptocurrency asset. Instead, you have a contract that states you will buy or sell bitcoin at a later date.
Futures are therefore protected from volatile markets and price changes. However, unlike if you possessed the currency altogether, futures do not permit you to stake or utilise coins for voting.
Spots are one-time digital asset purchases that allow buyers and sellers actual ownership of the cryptocurrency, as opposed to futures contracts. Every existing cryptocurrency exchange functions similarly to this one.
Because owning BTC futures to price rather than spot Bitcoin can result in underperformance, the structure of the Bitcoin futures ETF has come under fire. The fact that futures frequently trade at a greater price than the underlying asset, but they can also trade at a lower price, is another factor that makes traders loathe futures.
A futures ETF is therefore backed by derivatives (in this case, Bitcoin futures contracts), but a spot-based ETF is backed by actual BTC. This is the main distinction between a futures ETF and a spot ETF.
More importantly, investors’ emotions may cause the price of Bitcoin futures contracts to diverge from the actual market price, and it occasionally tracks the price erroneously. This risk does not exist in the case of a spot-based ETF, though.
How to Choose the Best Bitcoin ETF in Canada
When selecting the best Bitcoin ETF in Canada, there are several key factors to consider, including the size of the fund, the fee structure, the investment objective, and the quality of the underlying assets.
Fund Size
The size of the fund is an important consideration when selecting a Bitcoin ETF. A larger fund typically has more assets under management, which can provide greater liquidity and stability. A larger fund also tends to have a lower expense ratio, as the expenses are spread over a larger pool of assets.
Fee Structure
The fee structure of a Bitcoin ETF is another important factor to consider. ETFs typically charge management fees to cover the costs of running the fund. These fees can vary widely between funds and can have a significant impact on your investment returns over time. It is important to compare the fees of different ETFs and choose one with a fee structure that aligns with your investment goals.
Investment Objective
The investment objective of a Bitcoin ETF is another important factor to consider. Some ETFs are designed to track the price of Bitcoin as closely as possible, while others may have a more complex investment strategy, such as using derivatives to achieve higher returns. It is important to understand the investment objective of each ETF and choose one that aligns with your investment goals.
Quality of Underlying Assets
The Purpose Bitcoin ETF (BTCC) is the first Bitcoin ETF in Canada and one of the largest in the country. The ETF tracks the performance of the Bitcoin market and has a low fee structure, making it an attractive option for investors who want exposure to the cryptocurrency market. The ETF holds a mix of cash, derivatives, and other securities, providing investors with a well-diversified portfolio.
Best Canadian Bitcoin ETFs list
1. Purpose Bitcoin ETF (BTCC)
The Purpose Bitcoin ETF (BTCC) is one of the newest Bitcoin ETFs in Canada, launching in February 2021. The ETF is unique in that it offers investors a low-cost, passive investment option that tracks the performance of the Solactive Bitcoin Index. The index is designed to provide exposure to the performance of Bitcoin, minus expenses incurred from holding the cryptocurrency.
One of the key benefits of investing in the Purpose Bitcoin ETF is its low expense ratio of 0.5%. This is significantly lower than many of the other Bitcoin ETFs available in Canada, making it an attractive option for cost-conscious investors. Additionally, the ETF offers exposure to the global Bitcoin market, giving investors the opportunity to benefit from the cryptocurrency’s performance on a global scale.
Click here know more about Purpose Bitcoin ETF
2.Purpose Bitcoin ETF (BTCC)
The Evolve Bitcoin ETF (EBIT) is another new addition to the Canadian Bitcoin ETF landscape, launching in November 2020. Similar to the Purpose Bitcoin ETF, the Evolve Bitcoin ETF offers a passive investment option that tracks the performance of the Solactive Bitcoin Index.
What sets the Evolve Bitcoin ETF apart from other Bitcoin ETFs is its focus on sustainability. The ETF invests in companies involved in renewable energy and clean technology, as well as companies that have a positive impact on the environment. This makes the Evolve Bitcoin ETF a great choice for environmentally conscious investors who are looking to align their investments with their values.
The Evolve Bitcoin ETF has an expense ratio of 0.75%, making it slightly more expensive than the Purpose Bitcoin ETF, but still lower than many other Bitcoin ETFs available in Canada.
Click here know more about Evolve Bitcoin ETF
3.CI Global Bitcoin ETF (BTCC)
The CI Global Bitcoin ETF (BTCC) is one of the longest-running Bitcoin ETFs in Canada, launching in February 2020. The ETF offers a low-cost investment option that tracks the performance of the CI Galaxy Bitcoin Index, which is designed to provide exposure to the performance of Bitcoin, minus expenses incurred from holding the cryptocurrency.
One of the key benefits of the CI Global Bitcoin ETF is its liquidity, with the ETF trading on the Toronto Stock Exchange (TSX). This makes it a popular choice for investors who are looking for an easy and convenient way to invest in Bitcoin. Additionally, the ETF has an expense ratio of 0.40%, making it one of the lowest-cost Bitcoin ETFs available in Canada.
Click here know more about CI Galaxy Bitcoin ETF
4.Horizon Bitcoin ETF (BTCE)
The Horizon Bitcoin ETF (BTCE) is another option for investors looking to invest in Bitcoin through an ETF in Canada. The ETF offers a passive investment option that tracks the performance of the Solactive Bitcoin Index. The ETF has an expense ratio of 0.60%, which is lower than many other Bitcoin ETFs available in Canada.
One of the key benefits of the Horizon Bitcoin ETF is its focus on security. The ETF holds its Bitcoin in cold storage, which helps to reduce the risk of hacking and theft. Additionally, the ETF has a team of security experts who are responsible for monitoring and managing the ETF’s assets, providing added peace of mind.
5.3iQ The Bitcoin Fund (QBTC)
3iQ The Bitcoin Fund (QBTC) was created in 2020 by 3iQ, a Canadian investment firm. The goal of QBTC was to make it easier for investors to access the Bitcoin market. Prior to the creation of QBTC, investing in Bitcoin required a certain level of technical knowledge, making it difficult for many investors to participate. With QBTC, investors can now access the Bitcoin market through a regulated and secure investment vehicle.
3iQ The Bitcoin Fund (QBTC) invests directly in Bitcoin, giving investors exposure to the world’s largest cryptocurrency by market capitalization. The fund aims to provide investors with a simple and efficient way to access the Bitcoin market, while also offering a degree of security and protection.
3iQ The Bitcoin Fund (QBTC) is a regulated investment vehicle, offering a degree of security and protection to investors. This is particularly important for those who are new to the cryptocurrency market, as it provides peace of mind knowing that their investments are protected.
6.Fidelity Advantage Bitcoin ETF
The Fidelity Advantage Bitcoin ETF was created by Fidelity Investments, a leading global financial services firm, in 2021. The ETF was created to provide investors with a simple and efficient way to access the Bitcoin market, while also offering a degree of security and protection.
The Fidelity Advantage Bitcoin ETF invests directly in Bitcoin, giving investors exposure to the world’s largest cryptocurrency by market capitalization. The ETF aims to provide investors with a simple and efficient way to access the Bitcoin market, while also offering a degree of security and protection.
One of the key benefits of investing in the Fidelity Advantage Bitcoin ETF is that it is a passive investment strategy. This means that investors do not need to actively manage their investments, as the ETF is managed by experienced professionals who make decisions on behalf of the investors.
Conclusion
As you can see, there are a number of bitcoin ETFs in Canada that you can buy into if you want to get engaged in the market without trading cryptocurrency directly. You should exercise caution and only invest what you can afford to because the crypto ETF space (and crypto in general) is still a very young one with a lot of open questions and things that people simply don’t know yet.
Naren is a finance graduate who is passionate about cryptocurrency and blockchain technology. He demonstrates his expertise in these subjects by writing for cryptoetf.in. Thanks to his finance background, he is able to write effectively about cryptocurrency.