ETF

Beginner

Key Takeaways

An ETF, or exchange-traded fund, is an investment fund that holds a basket of assets and trades on stock exchanges like an individual stock. ETFs typically aim to track the performance of a specific index, sector, commodity, or asset class, offering diversified exposure in a single tradable instrument.
In early 2024, the SEC approved the first US spot Bitcoin ETFs. Spot Ethereum ETFs followed later that year, marking a significant expansion of regulated crypto investment products.
Spot crypto ETFs hold the underlying digital asset directly, while futures-based ETFs use derivatives contracts, resulting in different cost and tracking characteristics.

ETF stands for exchange-traded fund. It is a type of investment fund that holds a collection of assets, such as stocks, bonds, commodities, or cryptocurrencies, and is traded on a stock exchange throughout the trading day.

ETFs typically aim to replicate the performance of a specific index or asset class rather than actively picking individual securities. This passive approach generally results in lower management fees compared to actively managed funds. For retail and institutional investors alike, ETFs offer a straightforward way to gain diversified market exposure without needing to purchase each underlying asset separately.

ETFs in Crypto Markets

Cryptocurrency ETFs allow investors to gain exposure to digital assets without directly holding them. This makes them particularly relevant for institutional investors and individuals who prefer to access crypto markets through regulated, exchange-listed products rather than managing wallets and private keys.

In January 2024, the US Securities and Exchange Commission (SEC) approved the first batch of spot Bitcoin ETFs in the United States, ending more than a decade of rejected applications. Eleven funds launched shortly after approval, with products from BlackRock and Fidelity attracting significant interest. By June 2025, spot Bitcoin ETFs collectively held more than 1.2 million BTC, with total assets under management exceeding $126 billion.

Spot Ethereum ETFs received SEC approval in July 2024, further broadening the range of regulated crypto investment products available to market participants. For a broader overview of crypto-specific ETF products, check out our glossary entry on Crypto ETFs.

Spot ETFs vs. Futures ETFs

Crypto ETFs fall into two main categories. Spot ETFs hold the underlying asset directly; each share in the fund corresponds to actual cryptocurrency held in custody. Futures ETFs, by contrast, gain exposure through futures contracts rather than holding the asset itself. This distinction matters for cost and tracking accuracy: futures ETFs can experience tracking error over time due to the cost of rolling contracts forward as they expire, whereas spot ETFs provide a closer 1:1 relationship with the underlying asset's spot price. For a detailed comparison, see Bitcoin Spot ETF vs. Bitcoin Futures ETF.

Benefits and Considerations

Benefits:

Diversification across multiple assets or sectors through a single instrument.
Lower costs compared to many actively managed funds, due to passive index-tracking strategies.
Accessibility for investors who prefer regulated, exchange-listed vehicles over direct crypto ownership.
Liquidity through intraday trading on stock exchanges.

Considerations:

ETF investors do not directly own the underlying assets; they hold shares in the fund.
Expense ratios and management fees, though often low, still apply.
Crypto ETF performance may diverge slightly from the underlying asset depending on the fund structure and market conditions.
Regulatory frameworks vary by jurisdiction, which may affect the availability of specific products.

Is a Bitcoin ETF the Same as Buying Bitcoin?

No. Buying a Bitcoin ETF means purchasing shares in a fund that holds Bitcoin; you do not directly own the underlying Bitcoin or control a wallet. Buying Bitcoin directly gives you full ownership and custody of the asset, but requires managing a wallet and private keys. Each approach has different implications for fees, security, and accessibility.

ETF