What are Bitcoin ETFs worth investors' attention in the Canadian market?

This year, the cryptocurrency market has shown strong performance, with the price of Bitcoin reaching over $100,000 on December 16th. As the cryptocurrency market, especially the Bitcoin market, becomes more mature, the demand for corresponding investment tools among investors continues to grow. As the preferred investment tool for flexible investment, Bitcoin ETFs are becoming increasingly attractive to Canadian investors.

This article will focus on this, discussing the top five Bitcoin ETFs worth paying attention to in the Canadian market, providing investment decision options for Canadian investors.

What is a Bitcoin ETF?

Bitcoin ETF is a financial product that replicates the market price performance of Bitcoin by holding actual Bitcoin or Bitcoin-related derivatives. As a type of ETF, Bitcoin ETFs are also listed and traded, allowing ordinary investors to participate in the Bitcoin market as easily as buying and selling stocks.

Bitcoin ETFs can be divided into spot Bitcoin ETFs and futures Bitcoin ETFs based on the assets they hold.

Spot Bitcoin ETF: A spot Bitcoin ETF holds actual Bitcoin assets. These funds purchase and store Bitcoin, which constitutes the majority of the fund's assets. The structure of a spot Bitcoin ETF means that they closely track the actual price movement of Bitcoin. From an investor's perspective, this ability to effectively track Bitcoin prices is key, as it provides a way to effectively own the asset through a fund without having to buy Bitcoin directly.

Futures Bitcoin ETF: A futures Bitcoin ETF does not own the cryptocurrency directly but owns Bitcoin futures contracts. Futures contracts are standardized agreements that use margin trading, and compared to spot Bitcoin ETFs, futures Bitcoin ETFs can use leverage to amplify investment returns and risks. They are suitable for investors who wish to control a larger position in Bitcoin with a smaller amount of capital and are willing to bear higher risks.

For Bitcoin ETFs that hold actual Bitcoin, secure storage of Bitcoin is crucial. This often involves cold storage solutions, such as hardware wallets, and decentralized storage strategies. In addition, some ETFs may also use insurance services to protect the custody of Bitcoin from theft or other losses. Custody services are often provided by third-party professional institutions with high security measures and technical safeguards to ensure the security and integrity of Bitcoin.

Pros and cons of investing in Bitcoin ETFs

Investing in Bitcoin ETFs has some pros and cons. On the one hand, Bitcoin ETFs simplify the investment process, offering diversification and professional management. On the other hand, they come with their own set of risks and limitations, such as management fees and potential discrepancies between the ETF's performance and the actual price of Bitcoin. Understanding the pros and cons of these investment vehicles can help investors make informed decisions.

Here are some main pros and cons of investing in Bitcoin ETFs.

Pros of investing in Bitcoin ETFs

Simplified investment: Investors can easily gain exposure to Bitcoin price movements through traditional brokerage accounts without the need to directly purchase, store, or manage Bitcoin, avoiding the hassle of cryptocurrency wallets and technical complexities.

Regulation and security: In particular, Bitcoin ETFs approved by regulatory bodies such as the U.S. Securities and Exchange Commission (SEC), they offer higher reliability and security, reducing the risks associated with direct Bitcoin holdings, such as hacking attacks or loss of private keys.

Market integration and liquidity: Bitcoin ETFs are listed on regular stock exchanges, providing investors with a familiar trading environment and good liquidity. This also helps to further integrate Bitcoin into the mainstream financial market, potentially leading to more stable long-term price performance.

Diversification and tax advantages: Incorporating Bitcoin ETFs into an investment portfolio helps achieve asset allocation diversification, as Bitcoin's performance is generally less correlated with other traditional assets.

Hedging inflation: For some investors, Bitcoin is seen as a tool against inflation, and investing through ETFs can indirectly achieve this purpose.

Cons of investing in Bitcoin ETFs

Lack of direct ownership: Investors do not truly own actual bitcoins but instead hold a fund share that tracks the value of bitcoins. This means they cannot enjoy potential benefits that might come with directly holding bitcoins.

Higher expense ratios: Compared to traditional ETFs, Bitcoin ETFs may incur higher management fees and other costs, such as the costs required for managing and securing the held bitcoins.

Tracking error: Although Bitcoin ETFs aim to track the price of bitcoin, due to fee structures and other factors, they may not perfectly reflect the actual market price movements of bitcoin.

Market hours limitation: The trading of Bitcoin ETFs is limited to the hours when the stock market is open, unlike directly purchasing bitcoins, which can be traded 24/7.

Regulatory uncertainty: The regulatory framework for the cryptocurrency market is still evolving, and changes in regulations may affect the performance and availability of Bitcoin ETFs.

Market volatility: The bitcoin market is known for its high volatility, and investing through an ETF does not completely mitigate the risks associated with this volatility.

5 best Bitcoin ETFs in Canada for 2024

Here are 5 Bitcoin ETFs worth investors' attention in the Canadian market.

(The data in the above table is for reference only. Investors should obtain the most recent data through trading platforms, official websites, and other channels before making decisions. )

Purpose Bitcoin ETF (BTCC)

Currency Hedged：Yes

The Purpose Bitcoin ETF is the first Bitcoin ETF approved by regulators in Canada. It holds actual bitcoin assets, and as of December 20, 2024, the fund holds a total of 24,021.837204 bitcoins. The Purpose Bitcoin ETF offers investors two investment options: "currency-hedged" and "non-currency-hedged," with BTCC being the version that is currency-hedged. Currency hedging reduces the impact of exchange rate fluctuations on the performance of BTCC.

CI Galaxy Bitcoin ETF (BTCX.B)

Currency Hedged：No

The CI Galaxy Bitcoin ETF is managed with the participation of Galaxy Digital and CI Global Asset Management, with Galaxy Digital having an advantage in digital asset management. The fund is also divided into two types of fund units: hedged and non-hedged, with BTCX.B being the non-hedged fund unit. The fund allocates all of its assets to hold bitcoins and uses cold wallet storage for their safekeeping.

Fidelity Advantage Bitcoin ETF (FBTC)

Currency Hedged：N/A

The Fidelity Advantage Bitcoin ETF is an exchange-traded fund focused on Bitcoin investments launched by Fidelity Investments. Fidelity Investments is a globally renowned financial services company, known for its extensive range of mutual funds, retirement plans, and brokerage services. Fidelity has a long history of innovation in financial products and has also been actively involved in the cryptocurrency space. As of December 20, 2024, the fund holds 7,090.9405 bitcoins.

Evolve Bitcoin ETF (EBIT)

Currency Hedged：No

The Evolve Bitcoin ETF is launched by Evolve Funds Group, a Canadian asset management company known for its innovative ETF products and focus on emerging markets. EBIT allocates all of its funds to hold bitcoins and uses cold wallet storage for their security.

3iQ Bitcoin ETF (BTCQ)

Currency Hedged：N/A

The 3iQ Bitcoin ETF is an exchange-traded fund focused on Bitcoin investments launched by 3iQ, a Canadian investment fund management company. 3iQ Corp is a fund management company specializing in alternative investment products, with extensive experience in the cryptocurrency sector. BTCQ directly holds physical bitcoins and is a TSX-listed ETF priced in Canadian dollars. Additionally, the 3iQ Bitcoin ETF has another fund unit, with the ticker symbol BTCQ.U, which is a TSX-listed ETF priced in U.S. dollars.

How to buy Bitcoin ETF in Canada?

To purchase Bitcoin ETFs, you need to use your securities brokerage account. If you are a user of moomoo and have a brokerage account provided by moomoo, you can easily find Bitcoin ETFs and other crypto ETFs available for trading in the Canadian market using moomoo.

Here are the steps to buy Bitcoin ETFs using moomoo Canada:

1. Open the moomoo App and log in to your account.

2. Open "Markets" and select the "CA" market.

3. Go to the "ETF" section and choose "Crypto ETF".

4. Enter the detailed page of the ETF you decide to invest in and click "Trade" to execute the transaction.

Can you buy Bitcoin ETF in TFSA?

Yes, in Canada, you can purchase Bitcoin ETFs within a Tax-Free Savings Account (TFSA). This allows you to indirectly invest in Bitcoin without holding the cryptocurrency directly, and the profits generated from Bitcoin ETFs held in a TFSA are not subject to taxes when withdrawn.