Bitcoin ETFs: the funds, the fees, and the UK alternative

The spot bitcoin ETF was the most consequential product launch this asset class has had, and almost everything written about it in Britain is written for an audience that cannot buy it. This page covers what these funds are and how they turned out, then deals with the London-listed notes that are the actual UK route.

What a spot bitcoin ETF is

A trust that holds bitcoin with an institutional custodian and issues exchange-listed shares against it. Buy a share and you own a proportional interest in that bitcoin, less the sponsor's fee. The share price tracks the coin price because authorised participants can create and redeem shares whenever the two drift apart.

The word "spot" is carrying the weight. For three years before January 2024, the only US bitcoin funds held futures contracts rather than bitcoin, because that was what the SEC would approve. Those products had a structural cost — the monthly roll — that a spot fund does not. The mechanics are on spot vs futures.

What happened after January 2024

Eleven funds listed simultaneously on 11 January 2024 across three venues: Nasdaq took IBIT and BRRR, NYSE Arca took GBTC, BITB and Hashdex's DEFI, and Cboe BZX took the remaining six. First-day trading across the category was reported at $4.6bn.

What followed was one of the most lopsided outcomes in recent fund history. Rather than the assets spreading across eleven roughly comparable products, they concentrated almost immediately at the top. Two and a half years on, the distribution looks like this.

One fund has already left the market. Hashdex's DEFI was liquidated in August 2026, which is worth holding onto as a data point: in a category where the leader holds roughly half the assets, the funds at the bottom are running at a scale where the sponsor economics are marginal.

Why IBIT won

Not because it is structurally different. IBIT holds the same asset, with the same custodian, under broadly the same structure as BITB, ARKB, BTCO and most of the rest. Its fee, at 0.25%, is in the middle of the pack and higher than several competitors.

It won on distribution. BlackRock is the largest asset manager in the world and the iShares brand sits on the approved list of essentially every wealth platform, adviser network and institutional allocator that was going to buy any of these at all. When a compliance committee is signing off a first allocation to a new and controversial asset class, the name on the wrapper does real work.

The practical consequence for a buyer is that IBIT has the deepest order book and the tightest spreads in the category. For someone dealing frequently that is worth more than the ten basis points it costs over the smallest-fee alternative. For someone buying once and holding for a decade it is not. We work that comparison through on which crypto ETF is best.

The GBTC anomaly

Grayscale's fund is the most instructive thing in the table and the reason to be sceptical of any fee ranking that does not ask why a fee is what it is.

GBTC charges 1.50% — six to ten times its competitors — for exposure to exactly the same asset, held by the same custodian. On the face of it that is indefensible, and for new money it is. It still holds roughly $8.1bn.

The explanation is the tax lock-in. GBTC existed as a closed-end trust for years before the conversion, and a great many holders acquired at cost bases far below current levels. Selling to move into a cheaper fund triggers a capital gains event that, for those holders, dwarfs the annual fee difference. Grayscale has priced to that captive base rather than competing for new money.

And it has been explicit about the split: the Grayscale Bitcoin Mini Trust (BTC) charges 0.15% for the same exposure from the same sponsor. One firm running the same product at two prices, an order of magnitude apart, tells you everything about who each version is for.

What the funds did to bitcoin itself

Two structural effects are worth understanding because they are frequently overstated in both directions.

They created real coin demand. Unlike a futures product, a spot fund must buy bitcoin to issue shares. Reported figures put the combined US spot bitcoin ETF category at approximately $91bn in March 2026. That is a substantial pool of the asset held on behalf of fund shareholders rather than in individual wallets.

They concentrated custody. The large majority of that bitcoin sits with a small number of institutional custodians, with Coinbase Custody serving most of the major sponsors. Whether this matters is a judgement call, but it is a genuine change in the ownership topology of an asset whose original design premise was distributed self-custody.

What they did not do is dampen volatility. The asset behaves as it always has, and the historical drawdowns remain severe. A wrapper changes who holds the asset and how it is held; it does not change the asset. Past performance is not a reliable indicator of future events.

The UK route

None of the funds above are available to a UK retail investor. What is available, since 8 October 2025, is a physically backed bitcoin ETN listed on the London Stock Exchange or Cboe UK — and in 2026 those are priced better than their American counterparts.

• Bitwise Core Bitcoin ETP (BTC1) — cut to 0.05%, stated as continuing until further notice
• 21Shares Core Bitcoin ETP (CBTC) — 0.10%
• Invesco Physical Bitcoin (BTIC) — 0.10% discounted rate, which ran to the end of 2025
• WisdomTree Physical Bitcoin (BTCW) — 0.15%
• iShares Bitcoin ETP (IB1T) — 0.25%, after an introductory 0.15% to 1 January 2026
• Fidelity Physical Bitcoin (FBTC) — 0.25%

The 0.05% line undercuts every fund in the US table by a wide margin. The structural trade-off is that these are notes rather than funds, which adds issuer credit exposure — covered in full on ETF vs ETN vs ETP. And since 6 April 2026 they can only go inside an Innovative Finance ISA, which costs most investors far more in tax than any of this saves in fees.

What can go wrong

Beyond the obvious — the price falls, potentially a very long way — there are four product-level risks worth naming.

The sponsor closes the fund. It happened to DEFI in August 2026. You are paid out at NAV, which crystallises a disposal on a date you did not choose.

The custodian fails. Low probability, high impact, and concentrated across the category. Buying two funds from different sponsors frequently does not change this exposure at all.

The arbitrage breaks. Creation and redemption is what keeps the price honest. In a severely stressed market, or if a venue halts, the price can detach from NAV. The pre-conversion Grayscale trust is the historical example of what a persistent detachment looks like.

Issuer credit, for notes. Applies to the UK route rather than the US funds. A physically backed, independently custodied, secured note narrows this considerably — it does not eliminate it.