#What is the Cheapest Spot Bitcoin ETF?
If you're seeking a cost-effective option for a spot Bitcoin ETF, VanEck's HODL stands out as the least expensive choice available. Currently, investors incur no fees with this fund, unlike BlackRock’s iShares Bitcoin Trust ETF, which has a 0.25% expense ratio.
VanEck has decided to waive its usual 0.20% sponsor fee on assets up to $2.5 billion until July 31, 2026. With HODL managing approximately $1.06 billion in assets, this waiver period has substantial time remaining.
#Why Do ETF Fees Matter?
When evaluating ETF fees, understanding the implications is crucial. Although paying 0% versus 0.25% appears advantageous on the surface, the reality may differ. For an investment of $10,000 in IBIT, an annual fee of $25 goes to BlackRock, while HODL investors pay nothing. Over years, saving on fees compounds significantly.
However, IBIT commands assets between $53 billion and $58 billion, making it about 50 times larger than HODL. This scale results in tighter bid-ask spreads, deeper order books, and improved execution for substantial trades.
For investors moving large sums in and out of a Bitcoin ETF, IBIT’s liquidity advantage may outweigh the fee savings that HODL offers. A small amount of slippage on large trades can diminish the benefits of lower fees significantly.
#What Happens When the Fee Waiver Expires?
It's important to note that VanEck’s zero fee structure is promotional and not intended to last indefinitely. As soon as the fund reaches $2.5 billion in assets or the July 31, 2026 deadline arrives, the standard 0.20% fee will apply.
Even with this fee, HODL would still offer a slight edge over IBIT, undercutting it by five basis points. Both ETFs debuted in early January 2024 after the SEC approved spot Bitcoin ETFs, and they differ in their custody arrangements, using Gemini for HODL and Coinbase Custody for IBIT.
#How Should Investors Choose a Bitcoin ETF?
When deciding between Bitcoin ETFs, consider your investment strategy. If you anticipate holding long-term with a moderate allocation and prefer a buy-and-hold approach, HODL’s current fee structure is certainly appealing. Zero fees now and a manageable 0.20% moving forward, all while investing in the same underlying asset.
Conversely, for active traders or institutional allocators valuing the ability to trade with minimal friction, the liquidity advantages offered by IBIT are significant. While returns from HODL and IBIT before fees are likely to be nearly equivalent, the key factors affecting overall returns will include tracking errors, fee drag, and execution costs. Ultimately, the primary investment decision revolves around Bitcoin itself.