One example of a spot Bitcoin exchange-traded fund (ETF) that follows the price of Bitcoin is the Fidelity Wise Origin Bitcoin Fund (FBTC). Fidelity submitted its application for a spot bitcoin exchange-traded fund (ETF) in June 2023, not long after BlackRock submitted its application for an ETF. On January 11, 2024, the United States Securities and Exchange Commission agreed to approve its exchange-traded fund (ETF) and ten other ETFs. By utilising their current broking accounts on the CBOE stock exchange, investors can purchase FBTC.
What is a spot Bitcoin ETF?
An exchange-traded fund (ETF) is an investment fund traded on stock exchanges. Throughout a trading day, it trades at a price near its net asset value (NAV), comprising stocks, commodities, or bonds. Exchange-traded funds (ETFs) allow investors to diversify their portfolios and obtain exposure to various asset classes as quickly as possible.
The fundamental asset of a spot bitcoin exchange-traded fund (ETF) is bitcoin. This allows investors to gain exposure to Bitcoin’s price changes without purchasing and holding the cryptocurrency, which can be difficult and risky.
The regulatory regulation of spot bitcoin exchange-traded funds (ETFs) follows. Investing in Bitcoin gives investors a sense of security and safety that may not be present when dealing with unregulated cryptocurrency exchanges. Fraud, manipulation, and operational concerns are all examples of risks that can be mitigated with regulatory monitoring.
What is FBTC’s issuer fidelity?
According to its headquarters in Boston, Massachusetts, Fidelity Investments is an international firm that provides financial services. As one of the largest asset managers in the world, it provides a diverse selection of financial products and services to individuals, businesses, financial advisors, and institutional clients. These clients include business owners and investors. As of December 31, 2023, it had $12.6 trillion in assets under administration and $4.9 trillion under management and administration.
Established in 1946, Fidelity is a broking firm that manages a broad family of mutual funds, distributes money, provides investment advice, wealth management, life insurance, and retirement services, and executes and clears securities.
What Fees Does FBTC Charge?
The spot Bitcoin exchange-traded fund (ETF) offered by Fidelity has a sponsor fee of 0.25%, a reduction from the 0.39% initially intended for the fund. There will be no charge until July ends.
A sponsor fee is a payment imposed by the ETF issuer, in this case, Fidelity, to manage and operate the fund. Prior to the launch of spot bitcoin exchange-traded funds (ETFs), issuers competed to attract the most capital by offering the lowest fees.
How Does Fidelity’s ETF Differ from Other Spot Bitcoin ETFs?
Because of its well-known brand, Fidelity stands out among the many spot Bitcoin exchange-traded funds (ETFs) providers, except BlackRock. This is probably why it has been the second most successful Bitcoin exchange-traded fund (ETF) provider after BlackRock. Aside from BlackRock, FBTC’s assets have increased considerably more than other suppliers. In the first two months after its launch, it acquired more than seven billion dollars worth of bitcoin.
Besides BlackRock and Greyscale, FBTC has also seen larger trading volumes than most exchange-traded funds (ETFs). According to the Data Dashboard provided by The Block, it had approximately twenty per cent of the market’s trading volume two months after its introduction.
Fidelity also provides comparable fees. This is comparable to other providers compared to Greyscale, which has retained a hefty 1.5% cost on its spot bitcoin ETF (converted from the Greyscale Bitcoin Trust). However, Greyscale has kept a far higher fee.
How Does Fidelity Custody Its Bitcoin?
Compared to other spot bitcoin exchange-traded funds (ETFs), Fidelity distinguishes itself by keeping its bitcoin in custody through Fidelity Digital Assets. Consequently, it is responsible for managing the private keys for the wallets used to maintain its Bitcoin. This is an alternative to employing a third-party custodian, such as Coinbase, to manage the bitcoin on its behalf.
This has a few positive sides. Many other exchange-traded funds (ETFs) use Coinbase, but Fidelity is helping to avoid having a single point of failure. All exchange-traded funds (ETFs) may be jeopardised if they all held their bitcoin with a single custodian and that custodian was exploited. By diversifying this risk, you can reduce the likelihood of all exchange-traded funds (ETFs) losing their funds simultaneously.
However, it does involve some dangers. While Fidelity is responsible for storing its bitcoin, the company is also responsible for managing billions of dollars worth of the cryptocurrency. In light of this, it must implement stringent security measures for its private keys to protect enormous amounts of money. Fidelity, on the other hand, is not a newcomer to custody; the company has been offering services related to crypto custody for several years.
Are Fidelity’s Bitcoin Addresses Public?
Although Fidelity would not officially acknowledge that it is, the answer is yes. Despite this, the blockchain analytics platform Arkham Intelligence successfully located the public Bitcoin addresses associated with FBTC. This address most likely displays the current quantity of bitcoin that Fidelity holds in custody for its exchange-traded fund (ETF).
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