This ETF has outperformed the S&P 500 and Nasdaq so far in 2024. You might be surprised by what it holds (hint: not the “Magnificent Seven”).

The stock market has held up pretty well so far in 2024. Developments like weight loss drugs and artificial intelligence (AI) have helped fuel S&P 500 and Nasdaq Composite at new heights.

But in the background, alternative investments such as crypto have also shown some strength. In particular, Bitcoin up 41% so far in 2024.

I do understand, however, if you don’t feel like investing directly in crypto. Although relatively new, one solution could be to buy shares in an exchange-traded fund (ETF).

The VanEck Bitcoin Trust ETF (NYSEMKT:HODL) has returned 27% so far this year, handily outperforming the S&P 500 and Nasdaq.

Let’s dig into how Bitcoin ETFs work and analyze why the VanEck Bitcoin Trust could be a good choice for investors looking for crypto exposure.

What are spot Bitcoin ETFs?

Owning an ETF is a form of passive investing. Let’s say there’s a growth area like AI that you want to invest in, but you’re not sure which specific stocks to buy. ETFs that focus on artificial intelligence will span several different stocks, giving you exposure to the broader technology theme without owning any particular stock. By owning a basket of stocks instead of individual companies, you inherently mitigate risk through a deep level of diversification.

Spot Bitcoin ETFs have the same function. If you are looking for exposure to Bitcoin but don’t want to buy it directly through an exchange on Coinbase or robinhoodfor example, a spot ETF might be an optimal solution.

Why VanEck stands out from the pack

The chart below illustrates the performance of several leading spot Bitcoin ETFs so far in 2024.

Given that each of these funds track the price of Bitcoin, it’s no surprise to see that they’ve all essentially returned around 27% so far this year. Let’s look at a few factors that I think set VanEck Bitcoin Trust apart and make it my top pick.

One of the reasons I like the VanEck Bitcoin Trust in particular is its custodian. VanEck has been around for nearly 70 years and has a long history of investing in derivatives.

The company’s website says, “VanEck was one of the first US asset managers to provide investors with access to international markets and recognized early on the transformative potential of gold investments.”

Bitcoin is often referred to as digital gold, given its scarcity and tendency to increase in price during periods of high inflation. With $108 billion in assets under management, I believe VanEck understands the value of alternative assets and the potential that Bitcoin represents.

The story continues

Given that each fund illustrated above ultimately has the same broad objective of tracking the price of crypto, another way they may differ is in terms of costs to investors.

According to the table below, VanEck Bitcoin Trust has a lower expense ratio than most of its peers. The only exception is iShares Bitcoin Trust ETFwhich offers some temporary waivers on its management fees.

Data source: company websites

Why You Should Consider Buying Shares in VanEck Bitcoin Trust

Overall, I think some exposure to Bitcoin can be good for your portfolio. Although crypto is not yet a mainstream financial solution, Bitcoin is as blue chip as it gets for the crypto landscape.

Furthermore, given its limited supply, I believe that an increasing number of institutional investors will take the prospects of investing in it more seriously over time. This could have a dramatic impact on the price of the digital currency in the long run, making investing in the crypto space somewhat tempting now.

That said, I think spot ETFs are a much more prudent approach than buying cryptocurrencies. Investors looking for exposure to it at a reasonable price may want to consider the VanEck Bitcoin Trust.

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Adam Spatacco has positions in Coinbase Global. The Motley Fool has positions in and recommends Bitcoin and Coinbase Global. The Motley Fool has a disclosure policy.

This ETF has outperformed the S&P 500 and Nasdaq so far in 2024. You might be surprised by what it holds (hint: not the “Magnificent Seven”). was originally published by The Motley Fool