Bitcoin ETF: Spot vs. Futures – What’s the difference?
Before spot ETF approval in January 2024, Bitcoin futures ETFs already existed. The difference between them is essential and directly affects performance and costs.
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ETF Spot holds real Bitcoin. When you buy a share of IBIT (BlackRock), the fund buys BTC on the open market. The stock price directly tracks the Bitcoin price. It’s transparent, simple, and efficient.
ETF Futures: Futures
Futures ETFs like ProShares’ BITO hold Bitcoin futures contracts, not Bitcoin itself. Each month, the contracts are rolled for the next month (“Roll”). The roll can lead to “Contango” – a hidden loss over time when futures contracts are more expensive than the spot price.
Comparative performance
In 2024, IBIT clearly beat BITO. The Contango ate about 5-10% per year of BITO’s performance. Investors who wanted Bitcoin exposure through ETF futures got less than they expected.
Which is better?
For long term investors, Spot ETF is better. For some hedging strategies, futures may be appropriate. Read about the first year of the ETF.
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