This has been a banner year for the crypto market with bitcoin skyrocketing to all-time highs, driven by institutional demand, friendly regulations under US President Donald Trump, and deeper integration of the cryptocurrency into global financial systems.
Bitcoin’s most recent price rally (one of its biggest) on Oct. 6 pushed it past USD 126,000, the highest in its 16-year trading history. While the subsequent volatility dragged it back down to USD 118,000, the king of crypto is still up 25% in the year to date through Oct. 10.
With the continued loosening of crypto regulation in the United States, bitcoin has found new footing as institutional investors embrace it as a store of value. The recent surge in prices has lifted altcoins across the board, pushing the combined value of the crypto market above USD 4 trillion.
Spot bitcoin exchange-traded funds can provide an effective and simple avenue for investors seeking exposure. After falling out of favor in recent years, these funds are seeing a resurgence, with strong inflows in 2024. While Canada-listed bitcoin and other crypto ETFs represent a small portion of the broader market, their growing popularity signals renewed interest.
Sensing a market opportunity, US-based ETF heavyweight BlackRock made a Canadian foray in January 2025 with the launch of its low-cost iShares Bitcoin ETF IBIT. The move created ripples in Canada’s crypto ETF landscape, which is dominated by high-fee products. The risk mitigation inherent in ETFs also provides a way to benefit from bitcoin’s meteoric price surge over the past year without the need to directly hold the currency.
With Trump’s aggressive push into digital assets, tailwinds for crypto assets are expected to intensify, fueling fresh investor demand for ways to participate in its growth.
Canadians Have the Best of Domestic and US Bitcoin ETFs
Canadians have been investing in crypto ETFs (including bitcoin spot ETFs) for years. In February 2021, Canada became the first country to approve these funds. The Purpose Bitcoin ETF was the pioneer, followed quickly by the likes of the CI Galaxy Bitcoin ETF and Fidelity Advantage Bitcoin ETF. Today, Canadian investors have access to nearly three dozen crypto-themed ETFs, including ones tracking ethereum, the second-largest cryptocurrency.
Canadian cryptocurrency ETFs grew their assets under management from C$5.22 billion in September 2024 to C$5.68 billion in October—a notable 8.8% increase—fueled by renewed investor interest and confidence in digital currencies. With bitcoin prices topping USD 126,000, bitcoin ETFs are expected to continue to see strong inflows. Bitcoin notched a record high of USD 126,198 on Oct. 6, marking a staggering 109% gain over a one-year period.
Canadian investors looking to play the trend with ETFs have options beyond domestic names. They can also invest in more than 30 US-domiciled ETFs via their trading accounts. In the US, spot bitcoin ETFs have become the fastest-growing ETF class ever. Their popularity has paved the way for ethereum-tracking ETFs in the US, further enriching options for Canadian investors.
Added Advantages for Canadian Investors
In Canada, bitcoin ETFs have the added benefit of being eligible for tax-advantaged accounts like RRSPs and TFSAs. They can grow and withdraw their bitcoin-related investments tax-free with TFSAs and in a tax-sheltered way with RRSPs. With RRSPs, investors can claim a tax deduction for contributing to the account and have their investments grow in a tax-deferred fashion. However, if that investment incurs a loss, you can’t claim it as a capital loss.
Canadians must also consider currency fluctuations when investing in unhedged products or USD-denominated ETFs. A declining Canadian dollar can enhance returns on USD-based investments when repatriated. Conversely, returns could shrink if the loonie strengthens against the greenback. Currency-hedged bitcoin ETFs can remove uncertainty here.
ETFs vs. Spot ETFs
Bitcoin ETFs and bitcoin spot ETFs differ in their underlying assets and how they track bitcoin’s value. “A bitcoin spot ETF directly holds bitcoin in its portfolio,” explains Michael Zagari, investment advisor and associate portfolio manager at Wellington-Altus Private Wealth. “The value of the ETF moves in line with the current market price [the spot price] of bitcoin.” This direct exposure ensures a spot bitcoin ETF’s performance closely mirrors the digital currency’s price movements (minus management fees and associated costs). Investing in a spot ETF is akin to owning bitcoin itself.
Alternatively, synthetic bitcoin ETFs provide exposure through derivatives. These ETFs, which do not directly hold bitcoin, invest in bitcoin futures contracts—agreements to buy or sell the cryptocurrency at a predetermined price on a future date. Such a fund’s value “depends on the futures market rather than the spot price [of bitcoin],” explains Francis Sabourin, portfolio manager and investment advisor at Francis Sabourin Wealth Management, Richardson Wealth Limited.
Sabourin cautions that this can result in tracking discrepancies, due to market phenomena like contango or backwardation. Contango occurs when futures contract prices rise above spot prices, while backwardation is when the opposite happens.
Covered call bitcoin ETFs offer another route. They provide ”a balanced approach for bitcoin investors by combining the potential for capital appreciation with the benefit of yield generation,” says Zagari.
Canadian Cryptocurrency Regulation
Canada has proactively regulated cryptocurrencies, balancing fostering innovation and protecting investors. The regulatory framework is multifaceted, with key roles played by the Financial Transactions and Reports Analysis Centre of Canada and the Canadian Securities Administrators.
“Canada has issued guidelines for crypto asset trading, with the CSA focusing on platforms that facilitate cryptocurrency transactions, ensuring they comply with securities laws when necessary,” says Sabourin. The regulators periodically review crypto funds to ensure adequate liquidity, secure custody arrangements, and structural soundness, safeguarding investors while maintaining access.
Canada’s regulatory landscape will likely evolve as cryptocurrency adoption broadens. “Proposed changes include stricter rules around custodianship and limits on which types of investment funds can hold crypto assets,” says Sabourin. “There are ongoing discussions about the need for specific regulations for stablecoins and other crypto assets outside of the traditional securities laws, signaling further refinements in the regulatory environment.” As oversight improves, it will foster greater confidence among investors in crypto and crypto-related assets, including ETFs.
The Inherent Risks of Cryptocurrency Investing
Despite its soaring popularity, bitcoin remains a highly volatile and speculative investment. Dan Kemp, chief research and investment officer at Morningstar, cautions against relying on short-term price surges. “The dramatic change in price underscores the difficulty of estimating the fair value of an asset that is primarily a vehicle for speculation,” he says. Unlike traditional investments, such as stocks or bonds, which generate cash flows or interest, bitcoin’s valuation is far less tangible. “As an investor, it’s worth considering the value you would ascribe to an asset if you had to own it for an extended period without the option to sell,” Kemp advises.
ETFs are not immune to wild and unpredictable price movements—a core characteristic of cryptocurrency. “It is no different than any other new, innovative, and growing technology, so the path is typically volatile,” notes Zagari, adding that “anything can go wrong in the short term.”
Further, the custodial safety of crypto assets is still a concern, especially when private keys are lost, stolen, or hacked. However, “this issue has been somewhat mitigated with the introduction of bitcoin ETFs, which allow investors to outsource custodial risks,” says Sabourin.
For these reasons, experts stress that investors should carefully calibrate their exposure to bitcoin. “Especially if they cannot afford to lose their capital or suffer significant losses,” Zagari notes. Those seeking bitcoin exposure should be prepared to suffer significant losses and avoid making big bets.
