Allan Roth: Should You Buy A Spot Bitcoin ETF?

It finally happened. After years of refusing the approve spot bitcoin ETFs, the SEC finally approved 11 spot bitcoin ETFs. 

To me, it made no sense that the SEC previously allowed futures-based bitcoin ETFs but not ETFs that actually owned the bitcoin. Futures-based bitcoin ETFs must roll futures contracts monthly. In a previous interview two years ago, Bitwise chief investment officer, Matthew Hougan, told me they faced a 10% annualized head wind due to the futures churning that would be necessary had they issued a futures-based bitcoin ETF. The expense ratio of the previous futures-based bitcoin ETF is only the tip of the iceberg. 

On January 10th, the SEC issued its approval. Investors poured $4.7 billion in the first day. The new ETFs are as follows:

• ARK 21Shares Bitcoin ETF (ARKB) 
• Bitwise Bitcoin ETF (BITB) 
• Blackrock’s iShares Bitcoin Trust (IBIT) 
• Franklin Bitcoin ETF (EZBC) 
• Fidelity Wise Origin Bitcoin Trust (FBTC) 
• Grayscale Bitcoin Trust (GBTC) 
• Hashdex Bitcoin ETF (DEFI) 
• Invesco Galaxy Bitcoin ETF (BTCO) 
• VanEck Bitcoin Trust (HODL) 
• Valkyrie Bitcoin Fund (BRRR) 
• WisdomTree Bitcoin Fund (BTCW) 

Hougan wrote on X, formerly Twitter, “The lowest-cost Bitcoin ETF in America: BITB. 0.20% expense ratio, waived to 0.00% for the first six months.

Allan Roth's Bitcoin POV 

It often surprises people when I tell them I’ve owned a tiny bit of bitcoin for over six years. When it surges, my brain on bitcoin goes wild and tells me to buy more. My logical side of the brain stops me. As of now, I’ve had roughly a 1,000% return—far more than my equity ETFs.

How much will bitcoin be worth in a decade? Will it become the new digital gold or go the way of the tulips during the famed Dutch Tulip bubble of the 1600s? I readily admit that don’t know, but a couple years ago Hougan told me: 

• There’s a good likelihood bitcoin will emerge as a significant non-sovereign digital store of value, akin to or in rivalry with gold.  
• There’s a small likelihood (like a cheap, out-of-the-money call option) that it becomes the transactional backbone for Finance 2.0. 
• There’s a low or zero likelihood that it will be used as a currency to buy things like coffee or lunch. 

JPMorgan CEO Jamie Dimon has been slamming bitcoin for years as a fraud saying, “It’s just not a real thing; eventually it will be closed.”

Since, as I mentioned, I don’t know what will happen, I advise clients to invest a small portion, no more than 2% of their portfolio, in crypto but they have to request it and commit to staying in it for the long-haul. If it surges in the long run, they can feel great about it. If it plunges, they can be glad they invested 2% or less. 

Should You Buy a Spot Bitcoin ETF? 

I think the spot bitcoin ETFs are so much better than the futures-based ETFs and applaud Bitwise for both not pursuing a futures-based ETF and launching what is currently the lowest cost spot ETF. If I were going to buy a bitcoin ETF, BITB would be my choice.

But, since I believe any allocation to bitcoin should be long-term, I wonder why one would pay the expense ratio at all and instead just buy bitcoin directly. I’m also not a fan of buying gold but have written that it’s better to buy gold coins than pay an expense ratio for decades. The same logic goes for bitcoin. 

The one difference between buying gold and bitcoin directly is the security aspect. If you lose your key to the bank safe deposit box, you can pay to get a new one to get the gold coins you stored. If you lose your private key to your bitcoin wallet, it’s gone permanently. And, of course, any digital asset can be stolen by cyber criminals. 

My Conclusion 

Because the new spot bitcoin fees can be fairly low, I’m softening my views on bitcoin ETFs. For someone who wants both a little bit of bitcoin and simplicity, I’d tell them to go ahead and buy the lowest cost reputable spot bitcoin ETF, with the caveat that they should hold it for the long-run.