Article Amended: 22 Jul 2024

Key takeaways:

• The VanEck Bitcoin ETF is the first Bitcoin ETF to list on the ASX, albeit the Global X 21Shares Bitcoin ETF has already been trading on the Cboe Australia market since 2022, amassing over $100 million in net assets since that time.

• VBTC is a ‘feeder fund’, investing directly in the US-listed VanEck Bitcoin Trust to gain exposure to Bitcoin, whereas EBTC is 100% backed by physical Bitcoin held in ‘cold storage’.

• In response to the launch of VBTC, Global X is reducing its management fee for EBTC, which means both funds will charge 0.59% per annum as of July 1, 2024.

• Please note that at the time of this article publication, VanEck Bitcoin ETF (VBTC) is not available to trade via the Selfwealth platform.

With Bitcoin and Ethereum ETFs approved in the US back in January this year, and the asset class delivering triple-digit returns and record highs over the last year, the cryptocurrency market has witnessed a resurgence in interest.

That interest has flowed through to the local share market, where the Australian Securities Exchange recently provided clearance for the first ASX-listed Bitcoin ETF in the VanEck Bitcoin ETF (ASX: VBTC).

Considering the attention being drawn to this segment, we’re looking at how VBTC and EBTC compare in terms of key features.

Fund Objective

The VanEck Bitcoin ETF is intended to provide investors exposure to the price of Bitcoin, before fees and other costs, in a simple and convenient instrument that does not require investors to individually own and hold the cryptocurrency.

The fund aims to provide a return that tracks the performance of the price of Bitcoin in Australian dollars. More specifically, VBTC is designed to broadly follow the ‘Market Vector Bitcoin Benchmark Rate’, which is a composite reference rate for the price of Bitcoin.

Similarly, the Global X 21Shares Bitcoin ETF seeks to provide investment results that correspond, generally, to the price and yield performance, before fees and expenses, of Bitcoin in Australian dollars. The benchmark used by Global X to manage the fund is the ‘Crypto Compare Crypto Coin Comparison Aggregated Index (Bitcoin)’.

Fund Profiles

Becoming the first Bitcoin fund to list on the ASX, VanEck’s VBTC ETF was admitted to trading on June 20, 2024.

According to reports from the Australian Financial Review, the fund launched with just under $1 million in assets, however, around $3 million in trades were made across the market on the fund’s opening day.

On the other hand, the Global X 21Shares Bitcoin ETF has been listed on the Cboe Australia market, formerly known as Chi-X, since May 2022. This alternative market is an ASIC-regulated stock exchange for Australian shares, operated by Cboe Global Markets.

Cboe Australia is also considered an alternative trade execution venue, whereby investors can trade in both ASX-listed securities, and those only quoted on Cboe Australia.

As of June 18, 2024, the Global X 21Shares Bitcoin ETF has grown to oversee $105.8 million in assets under management.

Fund Holdings

Unlike various other ETFs, which would typically hold a diverse basket of shares or other instruments, both funds are dedicated exclusively to Bitcoin, which VanEck cites as “the world’s first and largest decentralised currency.”

The investment structure of the VanEck Bitcoin ETF relies on a principle known as a ‘feeder fund’. In effect, the fund invests directly in the US-listed VanEck Bitcoin Trust (HODL), which invests in Bitcoin and is regulated by the SEC and listed on the Cboe BZX Exchange.

As such, VBTC, which is domiciled in Australia, acts as a feeder fund, providing investors indirect access to the US-domiciled ‘HODL’ ETF. This also means that an investment in VBTC will be subject to fluctuations in the AUD/USD exchange rate, as well as the underlying price of Bitcoin.

Global X 21Shares Bitcoin ETF operates slightly differently. EBTC is 100% physically backed by Bitcoin and provides holders with an interest in Bitcoin held in ‘cold storage’ by Coinbase, the world's largest custodian of cryptocurrencies.

Cold storage involves storing Bitcoin private keys offline to reduce the risk of hacking. Before any funds can be released, all movements from cold storage accounts require the approval of multiple individuals. This is achieved by breaking up and distributing private keys across several global servers.

As is the case with VanEck’s fund, EBTC is not currency-hedged, which again means that an investment in the fund will be subject to fluctuations in the AUD/USD exchange rate, as well as the underlying price of Bitcoin.

At the time of writing, the number of Bitcoins per unit of VBTC is 0.000202127, while the Bitcoin entitlement per unit of EBTC is 0.000099563. These figures, which are subject to change, are based on the total amount of Bitcoin held by each fund, divided by the number of units on issue.

Performance and Distributions

As a newly listed fund, there is no performance data available for the VanEck Bitcoin ETF.

However, as mentioned earlier, VBTC is a feeder fund for US-listed VanEck Bitcoin Trust (HODL), for which, limited performance data is available since the start of April 2024, albeit without consideration for the Australian dollar. As such, caution should be exercised when reviewing the fund’s performance.

Meanwhile, the performance of the Global X 21Shares Bitcoin ETF since inception is a total return of 40.01% per annum. Over the last year, EBTC has delivered a total return of 149%.

In terms of Bitcoin in Australian dollars, the cryptocurrency has risen 488.5% over the last five years, and 137.8% over the last 12 months.

Investors should note that past performance is not indicative of future performance, and these results do not provide any guarantee that future returns will be of the same magnitude, or that returns will be positive.

According to both VanEck and Global X, neither fund pays unitholders a distribution, nor intends to do so.

Fees

According to VanEck, the management fee for its VBTC ETF is 0.59% per annum.

At the time of writing, Global X is charging a management cost of 1.25% per annum for its EBTC ETF, however, the fund manager has noted that this fee will be reduced to 0.59% per annum effective July 1, 2024.

Management fees are calculated in relation to the net asset value (NAV) of each fund daily, and prospective investors should note that other fees may apply.

Please refer to the relevant Product Disclosure Statements for up-to-date details on costs and expenses, which may be deducted from the fund’s assets as and when they are incurred.

Summary

VanEck is responsible for bringing the first Bitcoin ETF to the ASX, however, it should be noted that the Global X 21Shares Bitcoin ETF has traded on the Cboe Australia venue for over two years. Today, the latter oversees more than $100 million in assets under management.

In terms of structure, the two funds differ in their approach to gain exposure to Bitcoin. VBTC is set up as a feeder fund to invest directly in the US-listed VanEck Bitcoin Trust, while EBTC is 100% backed by physical Bitcoin held in ‘cold storage’. Neither fund pays a distribution, and while VBTC currently attracts a lower management fee, Global X has announced that it will reduce its fee from July 1, 2024, such that it will match VanEck’s Bitcoin product at 0.59% per annum.

For more information, you can read about the VanEck Bitcoin ETF here, and the Global X 21Shares Bitcoin ETF here. Before investing in any ETFs, you should consult the respective Product Disclosure Statement, which will be available on the fund’s website.

Investors should note that past returns are not an indicator of future returns and as this style of asset is evolving you should undertake your own independent research and carefully consider your own circumstances.