How IBIT's Expense Ratio Quietly Eats Your Bitcoin
The Short Answer
IBIT's 0.25% annual expense ratio (as listed on IBIT's fund page) isn't billed to your brokerage account. It's paid by selling small amounts of the fund's Bitcoin every day, which slowly reduces how much Bitcoin backs each share. After one year, each IBIT share represents about 0.25% less BTC than when you bought it — and the effect compounds over time.
This is normal, intentional, and easy to miss if you only watch the share price. But in Bitcoin terms, it's real.
How the Fee Actually Works
Most investors think an expense ratio shows up like a fee line item. With IBIT, it doesn't.
Here's what actually happens:
- There's no invoice and no deduction from your brokerage cash.
- The fund covers operating costs by selling a tiny fraction of its Bitcoin holdings every day.
- That sale reduces the BTC-per-share ratio — the amount of Bitcoin backing each share.
- You still own the same number of shares, but each share represents slightly less Bitcoin over time.
As of late January 2026, iShares Bitcoin Trust (IBIT) held approximately 773,671 BTC across 1.42 billion shares, yielding a ratio of about 0.000564 BTC per share. At launch in January 2024, that ratio was higher. A year from now, it'll be lower still.
Analogy: Imagine owning a gold bar that gets microscopically shaved every morning. You still have the bar. It just weighs a hair less each day.
Key point: This fee is nearly invisible because Bitcoin's price swings dwarf it. A 5% daily move swamps a 0.25% annual drag. But the drag is constant, it compounds, and it shows up in BTC terms over years.
What 0.25% Actually Costs in Bitcoin
Let's put numbers on it.
Scenario: You buy 1,000 IBIT shares today. At a BTC-per-share ratio of ~0.000564, those shares represent about 0.564 BTC.
| Timeframe | BTC-per-Share Ratio | Your BTC Exposure | BTC Lost to Fees |
|---|---|---|---|
| Day 0 | 0.000564 | 0.5640 BTC | — |
| Year 1 | ~0.000563 | ~0.5626 BTC | ~0.0014 BTC |
| Year 3 | ~0.000560 | ~0.5598 BTC | ~0.0042 BTC |
| Year 5 | ~0.000557 | ~0.5570 BTC | ~0.0070 BTC |
| Year 10 | ~0.000550 | ~0.5500 BTC | ~0.0140 BTC |
Projections use compound formula: Ratio × (1 − 0.0025)^years.
What does that cost in dollars? It depends entirely on Bitcoin's price — and the cost grows as BTC appreciates:
| Bitcoin Price | 5-Year Fee Drag (1,000 shares) |
|---|---|
| $100,000 | ~$700 |
| $150,000 | ~$1,050 |
| $250,000 | ~$1,750 |
The fee is fixed as a percentage, but its dollar impact scales with Bitcoin's price. If you're right about BTC going higher, you're paying more in absolute terms for the privilege of holding it in an ETF wrapper.
How IBIT Compares to Other Bitcoin ETFs
This is where fee differences get concrete — and where most comparisons stop too early.
| ETF | Ticker | Expense Ratio | 5-Year BTC Drag | Relative Cost |
|---|---|---|---|---|
| Grayscale Bitcoin Trust | GBTC | 1.50% | ~0.0410 BTC | ~6× IBIT |
| iShares Bitcoin Trust | IBIT | 0.25% | ~0.0070 BTC | Baseline |
| Fidelity Wise Origin | FBTC | 0.25% | ~0.0070 BTC | Same as IBIT |
| ARK 21Shares Bitcoin | ARKB | 0.21% | ~0.0059 BTC | ~16% less |
| Bitwise Bitcoin ETF | BITB | 0.20% | ~0.0056 BTC | ~20% less |
| Grayscale Bitcoin Mini | BTC | 0.15% | ~0.0042 BTC | ~40% less |
A few important takeaways:
- GBTC is the outlier. Its 1.50% fee is a legacy of its closed-end fund history. Over five years, GBTC holders lose roughly 0.0410 BTC per 0.564 BTC of exposure — nearly six times more than IBIT.
- IBIT and FBTC are tied at 0.25%. The two largest spot Bitcoin ETFs charge the same fee.
- ARKB, BITB, and BTC are cheaper. Grayscale's mini trust (BTC) currently has the lowest fee of any spot Bitcoin ETF at 0.15%.
- Small differences compound. A 0.10% gap doesn't sound like much, but over 10 years it's about 1% of your total Bitcoin exposure.
Does Fee Drag Matter for Options Traders?
Usually, not much — but it's worth understanding.
Options are priced off the ETF share price, but converting strikes to Bitcoin terms relies on the BTC-per-share ratio. Because that ratio drifts lower over time:
- A $50 IBIT strike implies a slightly higher BTC price today than it did six months ago.
- For weeklies and monthlies, the difference is trivial — fractions of a dollar in BTC terms.
- For LEAPS or long-dated positions, the ratio can shift by ~0.1–0.25% by expiration, which nudges implied Bitcoin prices by a small but measurable amount.
It won't make or break a trade, but it's part of the plumbing. Selling covered calls on IBIT? Our covered call calculator factors in the live BTC-per-share ratio to show break-even and returns in both USD and BTC.
Is 0.25% Worth It?
That depends on what you value.
Holding Bitcoin directly has zero expense ratio, but it comes with real responsibilities: private keys, custody security, and operational risk.
IBIT offers regulated institutional custody (via Coinbase Custody), seamless brokerage integration, simple tax reporting (1099s instead of tracking cost basis on every transaction), options market access, and the ability to hold Bitcoin exposure in IRAs and 401(k)s. The 0.25% annual fee is the price of that convenience.
By ETF standards, it's actually low — the average equity ETF charges around 0.50%, making most Bitcoin ETFs relatively cost-effective by comparison.
There's no universally right answer. The tradeoff is convenience versus self-management. For a full breakdown of IBIT vs. holding Bitcoin directly — including fees, taxes, and custody — see our comparison guide.
Bottom Line
IBIT's expense ratio doesn't show up as a bill — but it quietly reduces your Bitcoin exposure over time.
- The fee is paid by selling BTC daily
- Each share backs slightly less Bitcoin every year
- The drag compounds
- Its dollar impact grows as BTC rises
Compared to peers, IBIT sits in the middle of the pack on cost.
Understanding this doesn't mean IBIT is a bad product. It means you finally see what's happening under the hood.
See how fee drag affects your position →
Model historical ETF returns with our performance calculator →
Compare all six Bitcoin ETFs side by side →
Complete guide: Best Bitcoin ETF in 2026 →
Browse all Bitcoin ETF guides →
You may be able to offset fee drag through tax loss harvesting across Bitcoin ETFs.
Data on BTC-per-share ratios is sourced from official BlackRock iShares daily holdings disclosures and updates after each trading session.
Last updated: — ratio data refreshes daily.
FAQ
How does IBIT's 0.25% expense ratio work?
IBIT doesn't charge your brokerage account. Instead, the fund sells small amounts of Bitcoin daily to cover costs, which reduces the BTC-per-share ratio over time. After one year, each share represents about 0.25% less BTC than at purchase.
How much Bitcoin do you lose to IBIT fees over 5 years?
On a 1,000-share position (about 0.564 BTC today), five years of fee drag reduces exposure by roughly 0.0070 BTC. At $100,000 per BTC, that's about $700. The dollar cost scales with Bitcoin's price.
Which Bitcoin ETF has the lowest expense ratio?
Grayscale Bitcoin Mini Trust (BTC) currently has the lowest fee at 0.15%. BITB (0.20%) and ARKB (0.21%) are also cheaper than IBIT and FBTC (both 0.25%). GBTC remains the highest at 1.50%.
This article is for informational and educational purposes only and does not constitute investment, legal, or tax advice. Bitcoin and Bitcoin-related products are highly volatile and involve substantial risk of loss. Tax treatment of Bitcoin ETFs — particularly regarding wash sale rules — remains an area without explicit IRS guidance. Consult qualified professionals regarding your specific situation before making investment decisions. Past performance does not guarantee future results.