On this episode of the “ETF of the Week” podcast, Todd Rosenbluth discussed the Bitwise Bitcoin ETF (BITB) with Chuck Jaffe of “Money Life.” The pair talked about several topics regarding the fund to give investors a deeper understanding of the ETF overall.
Bitwise Bitcoin ETF (BITB)
Chuck Jaffe: One fund is on point for today and the experts to talk about it. This is the ETF of the Week podcast. Welcome to the ETF of the Week, where we get the latest take from the experts at VettaFi.com. It’s a site that has built and developed fabulous tools so you can be a savvy, sound investor in exchange-traded funds. And normally, well for over a decade, the ETF of the Week has pretty much always featured Tom Lydon, vice chairman at VettaFi.
But VettaFi has built, grown, and done a bunch of other things, and Tom is going to be stepping back just a little bit. He’s still going to be here a lot. But joining me today is Todd Rosenbluth. He is the head of research at VettaFi. Again, it’s VettaFi.com if you want more information. Todd Rosenbluth, great to chat with you.
Todd Rosenbluth: It’s great to be with you, Chuck. Thanks a lot for having me on.
Chuck Jaffe: Your ETF of the Week is?
Todd Rosenbluth: The Bitwise Bitcoin ETF (BITB).
Chuck Jaffe: The Bitwise Bitcoin ETF, ticker symbol BITB. How is this the ETF of the Week? As of the day that this airs, it’s a week old, because that’s the day that all of the bitcoin ETFs that are spot bitcoin ETFs came out. But there were like a dozen of them. So why this bitcoin ETF for ETF of the Week?
Todd Rosenbluth: So BITB came to market, as you mentioned, Thursday, January 11. What excites us about this is, bitcoin overall, is a part of Bitwise’s heritage. So this ETF gathered over $200 million in its first day of trading. It continued to see trading volume and is a low-cost, effective way of getting exposure to bitcoin. It actually has a fee of 0.00 for the months in the initial asset gathering, and is going to be quite cheap, at just 20 basis points once it crosses that threshold.
So we thought this ETF was a great one to highlight in this milestone.
Chuck Jaffe: How much difference do you see between the bitcoin ETFs? One of the things that’s really interesting to me is everybody’s focused on what are the expense ratios going to be and the funds, because there are so many of them. They are kind of having a race to get as low as they can. But because of the rules, as I understand them, with the spot bitcoin ETFs, you’re going to have higher trading costs because there’s not a national bid.
Ask spreads and things along those lines and trading costs are in addition to the expense ratio. They’re not part of the expense ratio. So do you believe that’s going to show up, and is that going to make a difference as to which bitcoin ETF you’re going to want to own?
Todd Rosenbluth: We do think liquidity is going to matter for investors, and the trading costs a bit, as the spread that you reference is going to be important. We’re days into the trading, so we’ve seen some pretty tight spreads overall for the industry, Bitwise ETFs in particular.
But what actually excites us most is that we at VettaFi hosted a Cryptocurrency Symposium the day after these products first launched, and we asked investor groups and advisors what mattered most to them. And it was actually the expertise of the firm that mattered more than the expense ratio. It mattered more than liquidity, it mattered more than the breadth of services. It was the expertise of the firm.
And that’s why Bitwise is the firm we wanted to highlight today. It’s got a long history of focusing on bitcoin investing. It would educate investors on how it can fit into a portfolio.
We’re going to talk about some of those key developments coming up in 2024. You often want to go to a partner where this is the area of expertise, and we think that Bitwise is one of those firms.
Chuck Jaffe: Will there be a difference to you in terms of which bitcoin ETF you want if you’re a short-term trader versus a long-term, hold, or hold on for dear life here?
Todd Rosenbluth: I think most people are probably going to have a short- to intermediate-term time horizon as these products get up to speed. But we do think a long time horizon makes sense. And so if that’s the case, the expense ratio is going to matter. We’re hearing investors and advisors who are looking to put a low single-digit percentage of their portfolio into bitcoin and have it stay there and have it grow overall.
And so if that’s the case, you want to make sure that the total cost of ownership, the expense ratio, as well as the trading volume, are important to you.
Chuck Jaffe: I’m always asking Tom Lydon about trend following, because that’s his origin story. He, of course, was a trend follower early on. These funds are brand new, so we don’t have 200-day moving averages and won’t for quite some time. But do you believe that these will be heavily trend-followed and heavily traded, and liquidity is going to matter in terms of which one’s going to be your tool to be your proxy for bitcoin?
Todd Rosenbluth: I think the trend is going to be the same for all of these ETFs because of the underlying spot bitcoin, and how it is going to trade. And of course, 2023 was an excellent year for bitcoin. It was one of the best-performing assets overall. If there was an ETF, it would have been among the better-performing ETFs that were there.
And so we know that we’ve seen a real rise in price leading into the potential and now the ultimate launching of these 10 bitcoin ETFs and the conversion of two other ones. Time will tell whether or not 2024 is a great year for bitcoin investing. But for those who want to have an allocation, we think this is a good way of getting exposure.
You of course get the benefits of an ETF and it trades on an exchange during market hours. You get to see the transparency of what that trade is going to cost you. It just makes it much easier for people who’ve owned ETFs over the years to allocate to bitcoin using an ETF like BITB.
Chuck Jaffe: Does it make the bitcoin futures ETFs — which was how people had to trade bitcoin — obsolete? I mean, if you’re a bitcoin owner, you want to be a bitcoin owner. Is there any reason now that spot bitcoin ETFs are there that you would go instead with the futures-based ETFs?
Todd Rosenbluth: The short answer is, maybe for some investors who want to have a product that has a long enough track record that has a trading history that is approved perhaps on certain platforms and available because it launched in 2021, then buy some of the other products that are futures-based can make sense. But we do think spot-based bitcoin ETFs are going to take market share over the next year or two from a futures-based product.
They’re just a cleaner way of getting exposure for many people to track the price of bitcoin to own an ETF that tracks the price of bitcoin.
Chuck Jaffe: We’re not done seeing creation, but is this the bulk of what we’re going to see? I mean, I would imagine anybody else who comes out now is so late to the party that there’s not going to be much innovation. There’s not going to be much of anything that you can do. So is this that we’ve seen are the bitcoin ETFs and the next one will be ethereum or what have you? It won’t be more expansion of bitcoin products?
Todd Rosenbluth: Oh no, Chuck. The ETF industry is known for innovation, so as we’re recording this, the next day, we will expect there will be an ETF that is trading that is a covered call that’s using a version of bitcoin. So it’s using options to generate income, using bitcoin as the underlying asset. We expect we’re going to see a couple more of those products.
We’re likely to see products that include bitcoin exposure and broader equities. Bitcoin fits into a portfolio in many different ways. We think we’re going to see ETFs that make it easier for investors to be able to do that. This is the beginning of the evolution of bitcoin exposure using ETFs. This isn’t the end.
Chuck Jaffe: Well, we will be watching it with you. We’re glad that we get you on ETF of the Week at times. And of course, it’s always great to chat with you because, like me, you’re a University of Michigan grad. Todd, great to talk with you. Go Blue. Enjoy the year. We’ll talk again soon.
Todd Rosenbluth: Go Blue. National champions Michigan Wolverines.
Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. Yep, that’s me. You can read all about my hour-long weekday podcast by going to MoneyLifeShow.com or by searching for it wherever you find great podcasts. If you want to get more information on investing in exchange traded funds, there’s no better place than VettaFi.com. They have a full suite of tools for you there.
You can learn about them at VettaFi.com and on Twitter or X at @Vetta_Fi. Todd Rosenbluth, head of research at VettaFi, my guest, well, he’s on Twitter, too. He is at @ToddRosenbluth. ETF of the Week is here for you every Thursday. Make sure you don’t miss one, by subscribing to the podcast now. See you next week.
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