Bitcoin is the talk of the town nowadays with its prices soaring past US$70,000. One of the key drivers behind the recent upswing is the launch of spot Bitcoin Exchange Traded Funds (ETFs) on 11 January 2024. After trading for just over two months, the spot Bitcoin ETFs have significantly influenced the cryptocurrency market. Let’s take stock of the performance and understand if ETFs are a good alternative to buying Bitcoin on a crypto-currency exchange. 

Spot Bitcoin ETFs have minimal tracking error with Bitcoin price

Prior to the introduction of spot Bitcoin ETFs, Bitcoin ETFs were tied to futures contracts or closed-end fund structure. These earlier forms of Bitcoin ETFs often came with high fees and tended to have large tracking error relative to Bitcoin’s actual price movements. This posed challenges for investors who seek accurate market exposure of Bitcoin.  The launch of spot Bitcoin ETFs has been the...