Crypto
Bitcoin ETFs and BlackRock's IBIT Explained: How Spot Bitcoin Funds Work
A spot Bitcoin ETF is a fund that holds real bitcoin and trades on a stock exchange, so you can buy it through a normal brokerage account without a crypto wallet. The US approved the first spot Bitcoin ETFs in January 2024. BlackRock's iShares Bitcoin Trust (ticker IBIT) is one of them. An ETF still carries bitcoin's price risk, plus fees and tax rules that depend on your country.
What is a Bitcoin ETF?
An exchange-traded fund (ETF) is a fund you buy and sell like a share. A spot Bitcoin ETF holds actual bitcoin, kept by a custodian, and its price tracks the price of bitcoin. You own shares of the fund, not bitcoin itself.
What is BlackRock's IBIT?
BlackRock is a large asset manager and the company behind the iShares range of funds. Its chairman and chief executive is Larry Fink. Its iShares Bitcoin Trust, ticker IBIT, was cleared by the US SEC on 10 January 2024 and began trading on Nasdaq on 11 January 2024, together with several other spot Bitcoin ETFs from other firms. The fund is sponsored by an affiliate of BlackRock, and its bitcoin is held by a custodian. The details, fee and holdings are on the official iShares website. Check the current fee there, because fees and fee waivers can change.
How does it work?
- The fund buys and holds bitcoin with a custodian.
- Shares of the fund trade on a stock exchange during market hours.
- You buy shares through a brokerage account, like any ETF.
- The share price follows the bitcoin price, with small differences from fees and timing.
Bitcoin ETF or owning bitcoin directly?
| Bitcoin ETF | Owning bitcoin directly | |
|---|---|---|
| How you buy | Brokerage account | Crypto exchange and wallet |
| Keys and seed phrase | Not needed | You manage them, or a custodian does |
| Trading hours | Stock market hours | 24 hours a day, every day |
| Annual cost | A fund fee | Trading and network fees |
| Can you move it | No, you hold fund shares | Yes, to a wallet or other service |
| Main risks | Bitcoin price, fees, custodian | Bitcoin price, losing keys, scams |
Why did the ETFs matter?
Before 2024, buying bitcoin meant using a crypto exchange and managing your own wallet or trusting an exchange. ETFs allowed people to get bitcoin exposure inside the accounts they already use. That made it easier for individuals and institutions to take part, but it also made it easy to buy without understanding the risks.
What if you live outside the US?
US-listed ETFs are not always available to non-US investors, and your country may have its own rules and taxes. Non-US investors in US-listed funds can face rules such as US estate tax. Check what your broker offers and ask a tax adviser. See our guide on investing in US funds from outside the US, which explains the main issues.
What are the risks?
- Bitcoin is volatile. The fund falls when bitcoin falls.
- Fees. The fund charges a yearly fee. Compare funds.
- Custody and structure. You rely on the fund's custodian and legal structure.
- Tax. The rules depend on your country.
- Hype. Easy access can encourage buying without research.
What should you check before buying any Bitcoin ETF?
- The yearly fee, and whether any waiver has ended.
- Who the sponsor and custodian are.
- How closely the fund has tracked bitcoin.
- How much the fund holds and how easily you can sell.
- How it is taxed where you live.
Want to learn this step by step?
Join the free 90-minute live masterclass, every Friday, 7 PM IST (India) or 7 PM ET (everywhere else).
Register for the masterclass nowImportant: This is education only and not financial advice. Crypto is volatile and you can lose all the money you put in. BlackRock and IBIT are described for education only. This is not an endorsement of any fund.
Image credit: Header photo: Larry Fink, BlackRock chairman and CEO (April 2025), by Kena Betancur / European Commission, CC BY 4.0, via Wikimedia Commons, cropped and resized. No endorsement is implied.
Frequently asked questions
What is a spot Bitcoin ETF?
A fund that holds real bitcoin and trades on a stock exchange, so you can buy it through a normal brokerage account.
What is BlackRock's IBIT?
The iShares Bitcoin Trust, a spot Bitcoin ETF from BlackRock that began trading on Nasdaq in January 2024.
Do I need a crypto wallet to buy a Bitcoin ETF?
No. You buy shares in a brokerage account. You do not hold the bitcoin yourself.
Is a Bitcoin ETF safer than owning bitcoin?
It removes the need to manage keys, but it still carries bitcoin's price risk, plus fees and tax rules.
Is this financial advice?
No. This is education only.
Namya Aankur Gupta is the founder and CEO of The AI Investor, an education brand that teaches practical AI, investing and crypto skills. Featured by LinkedIn News India as a voice to follow in India. Her content is educational and is not financial advice.