GBTC vs. IBIT vs. FBTC Bitcoin ETFs: A Comprehensive Comparison

Victor Olanrewaju
Last Updated:
March 29, 2024
Published:
March 29, 2024


Table of Contents

January 10th, 2024 would serve as a historic day as the U.S. SEC gave the green light to all 11 spot Bitcoin Exchange Traded Funds (ETFs). The approval did not come cheap as the SEC pushed back on several occasions.

However, after some back and forth, the regulator, led by Chairman Gary Gensler, gave in to the demand. As a result of the decision, investors can now access shares of Grayscale’s GBTC and BlackRock’s IBIT.

GBTC vs. IBIT vs. FBTC Comparison

When looking to compare between different Bitcoin ETFs, there are three key factors of consideration:

  1. Expense Ratio: Think of the expense ratio like a maintenance fee you pay for someone to manage your investment. It's a percentage of your investment that goes towards the fund's operational costs every year.
  2. Liquidity: This is about how easy it is to buy or sell the ETF without affecting its price too much. High trading volume means more liquidity.
  3. Performance and Risk: All three ETFs have shown similar recent price increases, indicating good performance. However, their risk levels, measured by things like volatility (price swings) and drawdown (peak to trough decline), vary.

This article gives a detailed explanation of Bitcoin ETFs, and the three common options, GBTC, IBIT, and FBTC. In summary, this is how the three ETFs compare:

  1. Expense Ratio:
    • GBTC (Grayscale Bitcoin Trust ETF) has a high expense ratio of 1.50%. That's like paying $15 every year for every $1,000 you invest.
    • IBIT (iShares Bitcoin ETF by BlackRock) has a much lower expense ratio of 0.25%, so you only pay $2.50 for every $1,000 invested annually.
    • FBTC (Fidelity Wise Bitcoin ETF) started with a 0% expense ratio, which means it was free initially but will change to 0.25%, matching IBIT's fee.
  2. Liquidity:
    • IBIT is very liquid, attracting a lot of trading activity, which means it's easier for you to trade without big price swings.
    • GBTC has been experiencing outflows, meaning people are selling off their investments, which could indicate issues with liquidity or investor confidence.
    • FBTC, while newer and with a compelling initial offer of no fees, still hasn't outpaced IBIT in terms of liquidity.
  3. Performance and Risk:
    • GBTC has experienced a significant drawdown in the past, indicating higher risk.
    • IBIT and FBTC have similar, lower risk profiles compared to GBTC.

In conclusion:

  • If you prefer lower fees and higher liquidity (ease of trading), IBIT (iShares Bitcoin ETF by BlackRock) is a solid choice. It's like getting a good deal for a service that's in demand and easy to use when you want.
  • If you're attracted to newer options with initially no fees (which will eventually match IBIT's fees) and are okay with a bit of uncertainty for potentially higher rewards, FBTC (Fidelity Wise Bitcoin ETF) could be appealing.
  • GBTC (Grayscale Bitcoin Trust ETF) might be less attractive due to its higher fees and liquidity challenges, but it has a long history and was a pioneer in the space.

In layman's terms, IBIT seems to offer a good balance of cost, ease of trading, and reliability. FBTC is an interesting newcomer with a promising start, especially on the fee front. GBTC, despite its pioneering status, faces challenges that might make it less appealing compared to the others.

Bitcoin ETFs: A Detailed Explanation

Not everyone understands what an ETF is, not to mention a Bitcoin ETF. But in this piece, you will get it.

An ETF provides an avenue for anyone to invest in an asset or group of assets without actually buying the asset. For example, people invest in Gold ETFs but do not own gold bars in their residences. Instead, they can trade gold as an investment vehicle on traditional exchanges.

The easiest way to define Bitcoin ETFs is that they offer investors exposure to Bitcoin without them owning the cryptocurrency itself. In other words, a Bitcoin ETF is a publicly traded asset that imitates the spot price of BTC. Unlike Bitcoin traded in the cryptocurrency market, Bitcoin ETFs are regulated by the SEC.

Despite the availability of 11 ETFs, two, namely the Grayscale Bitcoin Trust (GBTC) ETF, and iShares Bitcoin ETF (IBIT) which is issued by BlackRock, the world’s largest asset manager. These two ETFs have been dominating in terms of trading volume since the approval of the assets.

However, it is important to understand the difference between GBTC and IBIT. For instance, BlackRock’s iShares allowed redemption like normal ETFs from scratch. However, Grayscale could not provide this function during the early periods. 

Beyond that, knowing the dividends, fees, and expense ratio assigned to each ETF is important. Thus, this article will explain all of this in subsequent segments.

Overview of Grayscale Bitcoin Trust ETF (GBTC)

GBTC's journey to becoming an ETF did not begin recently like others. For the unfamiliar, Shares of the Grayscale Bitcoin Trust date back to 2013 when GBTC started trading privately with accredited investors. Later, Grayscale upgraded the trust to public trading on Over-The-Counter (OTC) markets. 

In 2017, Grayscale applied to offer a spot Bitcoin ETF but the SEC denied the application. During the same year, the trust accrued $1 billion in Assets Under Management (AUM). Despite the milestone, the firm faced challenges in getting the ETF approved.

However, after filing a lawsuit against the SEC’s decision, the DC Circuit Court ruled in favor of Grayscale and asked the SEC to uplift GBTC to spot Bitcoin ETF. As of this writing, GBTC’s changed hands at $63.17, representing a whopping 14.13% hike within the last month. In the face of the price increase, outflows since GBTC converted to a Bitcoin ETF have been incredible.

According to data from Farside, GBTC outflow has surpassed $14 billion since the conversion. Meanwhile, GBTC’s expense ratio is 1.50%. This is charged to investors annually and serves as the administration and custodial fee of the Bitcoin Grayscale owns.

When compared with other ETFs, the expense ratio is relatively expensive. As such, investors who might not be aware of other options might continue paying the premium fee. Moreover, Grayscale’s high outflows mean that the issuer risked losing out liquidity to other ETFs. 

Besides that, GBTC faced pressure in the first few weeks of January. During that time, a U.S. court allowed Gemini to sell 31.2 million GBTC shares. This was valued at $1.6 billion. Around the same period, bankrupt crypto exchange FTX also got the nod to sell its stake in the trust.

Overview of iShares Bitcoin Trust ETF (IBIT)

BlackRock’s iShares Bitcoin ETF launch was phenomenal as it became the first issuer to hit $1 billion in trading volume. As of March 27th, IBIT had $15.49 billion in spot ETF AUM. Unlike Grayscale, IBIT has a lower annual expense ratio of 0.25%.

This low ratio is one of the reasons BlackRock has attracted more liquidity to its end than the others. With an increase in liquidity, demand for IBIT might increase, and this could influence its price. At the time of writing, one share of IBITC costs $14.40. Like Grayscale, this value was a 14.26% increase in the last 30 days.

However, IBIT might extend its lead over other ETFs despite having a higher market share. In the first few weeks of March, IBIT nabbed 47% of the total trading volume. Despite Grayscale and BlackRock’s lead, Fidelity’s Bitcoin ETF was another asset challenging for the top spot.

Overview of Fidelity Wise Bitcoin ETF (FBTC)

GBTC’s performance vs. FBTC (Source: PortfolioLabs)

As of this writing, FBTC had a mind-blogging $8.66 billion in AUM. When compared with GBTC this value was much higher as the latter has $6.97 billion. One of the reasons the ETF had higher assets than Grayscale is its expense ratio. Currently, Fidelity takes a 0% expense ratio but by August 2024, it will begin charging an expense fee of 0.25%.

Despite the incredible offer, FBTC had not been able to outpace IBIT’s dominance. FBTC’s value was $62.06. Like GBTC and IBIT, the performance within the last month was almost the same.

In the meantime, FBTC was trading at a 0.07% premium to the fund’s Net Asset Value (NAV), indicating that Bitcoin’s price was reflected in Fidelity’s reference rate index. Apart from the impact of BTC, the Boston-based firm is known for scoring high marks in managing investors’ assets. With this reputation and the current free expense ratio, FBTC might challenge IBIT for the highest market share.

GBTC vs. IBIT vs. FBTC Performance Analysis

IBIT’s performance vs. GBTC (Source: PortfolioLabs)

When it comes to performance, GBTC and FBTC have outperformed IBIT. On a Year-To-Date (YTD) basis, IBIT’s price increased by 46.94%. GBTC climbed by 50.38% while FBTC's YTD performance was a 46.87% increase.

Though these performances were close, the same could not be said of the Risk-Adjusted ratio which evaluates an investor’s return compared to the risk involved. GBTC’s Risk-Adjusted ratio as of this writing was 0.23 while FBTC's was 0.21. IBIT, on the other hand, had a ratio of 0.37.

In terms of the drawdown, data showed that GBTC had the worst decline. Since its inception, the Bitcoin ETF has experienced a maximum drawdown of 89.91%. However, FBTC and IBIT were close at 16% and 16.81% respectively. 

But volatility has been similar for all three ETFs with FBTC registering 21.57% regarding price fluctuations. IBIT was at 21.69% while GBTC’s volatility stood at 21.47%. However, none of these Bitcoin ETFs have paid out dividends as they are all less than a year old.

Irrespective of the strong correlation between the assets, investors need to look out for the state of the market breadth to ascertain the health of the ETFs. In addition, price deviation for the Net NAV is also key.

If the ETF changes hands at a premium to the NAV, then investors might have nothing to worry about. In this case, the ETF could be considered undervalued. However, if the asset trades at a discount, the assets might be termed overvalued and investors might bear the brunt.

Analysts Comments and Market Insights

Going forward, the values of these shares might increase more than it has done over the last few months. However, an ETF like GBTC might undergo a correction considering the high outflows it has had.

Meanwhile, an asset management analyst at Bloomberg James Seyffart, said that Grayscale’s outflows were linked to the Gemini sell-offs. As such the bullish momentum might slow down. Another senior analyst at the firm Eric Balchunas, shared that iShares Bitcoin ETF has displaced many other assets to become the top trading asset in the last 50 days. In Balchunas’ opinion, Bitwise Bitcoin ETF (BITB) is also one of the best assets to buy apart from IBIT and FBTC.

Eric Balchunas’ opinion on Bitcoin ETFs (Source: X)

However, this prediction might also depend on the fees charged by these issues. For ETFs, fees play a vital role even though they serve as costs for managing the assets. If fees are too high, demand might become low. On the other hand, a relatively low fee could attract more investors.

A glaring example is Fidelity which seems to be competing with BlackRock for dominance. But it might be difficult for FBTC to outshine IBIT considering how BlackRock has a liquidity edge of Grayscale and Fidelity.

Alternatives to Spot Bitcoin ETFs

While spot Bitcoin ETFs offer exposure to BTC, other investors have a high-risk appetite and would rather buy Bitcoin directly. If this is the case, buying Bitcoin is straightforward as investors can head to different exchanges to get some.

However, it is not advisable to store Bitcoin on exchanges. Instead, investors can store the coins in cold storage while ensuring that their private keys are safe. 

On the other hand, spot Bitcoin ETFs like Franklin Bitcoin ETF (EZBC), ARK 21Shares Bitcoin ETF (ARKB), and BITB are substitutes for the ETFs discussed above. But before deciding which of the options to pick, it is important to assess their liquidity and expense ratio. 

At the same time, owning Bitcoin has its benefits as these traditional firms would not be the custodians of your coins. Instead, you would be in control of your assets. 

Final Thoughts

In conclusion, the introduction of spot Bitcoin ETFs has been revolutionary. By allowing trading of the assets, investors can have exposure to the cryptocurrency without owning any. One would admit that it was a struggle to get to the approval stage. But thanks to the doggedness of firms like Grayscale, there are now many others like IBIT, FBTC, and GBTC.

Although IBIT seems to be the preferred choice of investors, FBTC’s expense fee which is cheaper than the rest makes it one to keep an eye on. For GBTC, it might not be able to flip IBIT’s trading volume as long as the outflows continue to increase.

Therefore, the iShares Bitcoin ETF might be the eventual champion in this heated contest. In addition, investors who desire to buy another of these ETFs need to do research. This is because it is important to have an idea of the risks and potential rewards of getting the share before investing. If possible, talk to an investment expert before making a decision.

Additional Resources

To find out more about IBIT, you can visit the iShares Bitcoin Trust official page, and get information on the investment objective of the project. If you prefer, GBTC, Grayscale offers an in-depth explanation of the product while Fidelity also offers the same.

Disclaimer

This content is meant for information purposes only, and should not be taken as investment advice. Buying and selling assets like Bitcoin ETFs can be considered risky. Coinfeeds will not be responsible for losses that may appear as a result of the products or services mentioned. Readers are advised to do their research and consult a financial advisor before making any investment decision.