Crypto ETFs are becoming increasingly popular among traditional investors. Read on to learn what cryptocurrency ETFs are and what crypto ETFs you could invest in today.
What Are Cryptocurrency ETFs?
Cryptocurrency exchange-traded funds (ETFs) track the value of cryptocurrencies or cryptocurrency companies and trade on traditional exchanges rather than on crypto exchanges.
Crypto ETFs represent a way for mainstream investors to gain exposure to bitcoin in a regulated manner without having to hold and store bitcoin directly.
A crypto ETF tracks the performance of a digital currency like bitcoin, a basket of several digital assets, or a basket of crypto companies, thereby making it easy for traditional investors to diversify their holdings by gaining access to a new asset class.
At present, the United States is yet to approve a Bitcoin spot ETF, but investors can invest in Bitcoin futures ETFs instead. The distinction between the two is that Bitcoin derivatives back Bitcoin futures ETFs, whereas a bitcoin spot ETF would be backed by actual bitcoin holdings.
Top Cryptocurrency ETFs
Let’s take a look at the best cryptocurrency ETFs you could add to your portfolio to gain exposure to the crypto markets.
Amplify Transformational Data Sharing ETF (BLOK)
Amplify Transformational Data Sharing ETF (BLOK) is an actively managed ETF that aims to provide substantial returns by investing at least 80% of its net assets in blockchain-related securities.
BLOK is made up of publicly traded companies that are actively engaged in the research and development of blockchain technology, partnering or investing in this technology, as well as firms that are acting as members of several consortiums dedicated to blockchain technology.
BLOK classifies these companies into two major categories, the primary being those that generate significant revenue from blockchain-related activities, and the secondary being companies that directly invest in or partner with blockchain ventures.
Fund Details:
- Number of holdings – 47
- AUM – $447 million (As of 4/11/2022)
- Expense Ratio – 0.71%
- Inception Date – 1/17/2018
Bitwise Crypto Industry Innovators ETF (BITQ)
Bitwise Crypto Industry Innovators ETF (BITQ) is an index fund that tracks the performance of the Bitwise Crypto Innovators 30 Index. The equity-based ETF allows you to invest in leading companies from within the crypto economy.
BITQ tracks an index that is designed by Bitwise that identifies companies that pioneer and generate most of their revenues from crypto-related activities. At any given time, the index is comprised 85% of companies spearheading innovations in the crypto space and the remainder being organizations that have a minimum of $10 billion in market cap, and are involved in some way or another in the crypto industry.
Typically, companies included in the index derive 75% of their revenue from within the crypto industry or have 75% of their net assets tied up in digital tokens.
Fund Details:
- Number of holdings – 29
- AUM – $60,002,718 (As of 4/11/2022)
- Expense Ratio – 0.85%
- Inception Date – May 11, 2021
First Trust Indxx Innovative Transaction & Process (LEGR)
First Trust Indxx Innovative Transaction & Process (LEGR) is a passively managed index-tracking fund that aims to provide investors with capital gains that correspond to the Indxx Blockchain Index. The rules-based index is designed to track several publicly traded companies that are actively investing, using, or developing blockchain-based products.
The Index lists companies that have devoted material resources to the use of blockchain technology. Each security included in the index must meet certain eligibility requirements based on size, liquidity, and trading minimums. The index is reconstituted and rebalanced semi-annually.
Fund Details:
- Number of holdings – 4,450,002 outstanding shares
- AUM – $103.20 million (As of 30/09/2022)
- Expense Ratio – 0.65%
- Inception Date – 09/04/2018
Global X Blockchain ETF (BKCH)
Global X Blockchain ETF (BKCH) aims to invest in companies that are poised to benefit from the increased adoption of blockchain technology. This includes crypto mining companies, crypto payment providers, blockchain applications, mining hardware companies, and digital asset integration companies.
BKCH tracks the performance of the Solactive Blockchain Index, which represents a portfolio of stocks tied to the crypto economy. The index classifies companies according to the extent to which they derive revenue from blockchain-related activities. These categories include:
- Pure-Play: Companies that derive a minimum of 50% of their revenues from blockchain activities
- Pre-Revenue: Companies, whose primary business is in the blockchain industry but don’t currently generate revenue
- Diversified: Companies that derive less than half of their revenue from blockchain activities
For a company to qualify for the Solactive Blockchain Index, it must have a share capital of $200 million, an average daily value traded of at least $2 million over the last six months, and a primary listing in a developed or emerging market, among other requirements.
Fund Details:
- Number of holdings – 24
- AUM – $58.31 million (As of 4/11/2022)
- Expense Ratio – 0.50%
- Inception Date – 07/12/21
Hashdex Bitcoin Futures ETF (DEFI)
Hashdex Bitcoin Futures ETF (DEFI) is a regulated, actively traded fund that provides indirect price exposure to bitcoin through Bitcoin futures contracts. The Fund issues shares that are traded publicly on the NYSE Arca stock exchange under the ticker DEFI.
Shares can be traded by investors through their brokers. Moreover, under its current mandate, the fund does not hold, buy, or otherwise own the sum of the cryptocurrency.
The fund’s main investment objective is to track the daily price performance of the Hashdex U.S. Bitcoin Futures Fund Benchmark. The benchmark is composed of Bitcoin futures contracts listed on the Chicago Mercantile Exchange Inc (CME).
Under normal market conditions, the fund invests in benchmark component futures contracts and their cash equivalents. Since the fund aims to track the price performance of bitcoin by investing in benchmark futures contracts as opposed to holding bitcoin directly, the price of the shares will fluctuate from changes in the spot price of bitcoin.
Fund Details:
- Number of holdings – 26
- AUM – 2,672,396.89 (As of 7/11/2022)
- Expense Ratio – 0.92%
- Inception Date – 9/15/2022
ProShares Bitcoin Strategy ETF (BITO)
ProShares Bitcoin Strategy ETF (BITO) is the first US bitcoin-linked fund that gives investors indirect exposure to bitcoin in a transparent, liquid, and convenient way. The ETF aims to provide capital appreciation by giving investors exposure to Bitcoin futures contracts. The Fund may also invest in other instruments such as US treasury bills, repurchase agreements, and reverse repurchase agreements.
For the fund to maintain its exposure to Bitcoin futures contracts, it must sell its futures contracts as they near expiry and replace them with new futures contracts that have longer expiry dates. This is commonly referred to as “rolling” a futures contract.
BITO is classified as non-diversified, which means the fund can invest a relatively large portion of its assets in financial instruments with a single intermediary or several intermediaries.
Fund Details:
- Number of holdings – 4
- AUM – $601,591,59 (As of 6/30/2022)
- Expense Ratio – 0.95%
- Inception Date – 10/18/21
Simplify Bitcoin Strategy PLUS Income ETF (MAXI)
Simplify Bitcoin Strategy PLUS Income ETF (MAXI) seeks capital appreciation and income for investors by providing exposure to bitcoin. MAXI is an actively managed exchange-traded fund that seeks to achieve its main investment objective by employing three main strategies: a Bitcoin futures strategy, an income strategy, and an option overlay strategy.
The fund is structured to be a capital-efficient way to invest indirectly in bitcoin while potentially generating significant returns. The fund can be considered as providing bitcoin exposure with a hedge, because of the cushion the income may create in case any bitcoin price meltdowns occur.
Fund Details:
- Number of holdings – 6
- AUM – $5,491,623.71 (As of 4/11/2022)
- Expense Ratio – 0.97%
- Inception Date – 09/29/2022
Siren Nasdaq NexGen Economy ETF (BLCN)
Siren Nasdaq NexGen Economy ETF (BLCN) seeks to invest in companies focusing on research, development, and the adoption of blockchain technology. The Siren Nasdaq NexGen Economy ETF (BLCN) aims for long-term growth by tracking the gross investment returns of the NASDAQ Blockchain Economy Index.
The Nasdaq Blockchain Economy Index was formed through a partnership between Siren and Nasdaq. This is a collaboration between the two for research, analysis, and investigation of blockchain technology’s future potential. The index is designed to measure the performance of companies that are involved directly or indirectly in blockchain technology.
As of March 31, 2022, the Nasdaq Blockchain Economy Index included companies with a capitalization range of between $246 million to over $2 trillion. Under normal conditions, BLCN will invest more than 80% of its assets in the index.
Fund Details:
- Number of holdings – 64
- AUM – $104,766,266 (As of 3/11/2022)
- Expense Ratio – 0.68%
- Inception Date – 01/17/18
Valkyrie Bitcoin Strategy ETF (BTF)
Valkyrie Bitcoin Strategy ETF (BTF) is an actively managed ETF on the NASDAQ that invests primarily in Bitcoin futures contracts. BTF’s ultimate objective is to provide investors with capital gains.
BTF is an actively-managed exchange-traded fund that aims to achieve its investment objective by investing most of its assets in bitcoin and collateral investments. However, the fund will not directly invest in bitcoin. Under normal conditions, they will aim to buy several Bitcoin futures contracts so that the total notional value of the underlying BTC is close to 100% of the fund’s net assets.
Fund Details:
- Number of holdings – 4
- AUM – $22,982,787.50 (As of 4/11/2022)
- Expense Ratio – 0.95%
- Inception Date – 10/21/2021
VanEck Bitcoin Strategy ETF (XBTF)
VanEck Bitcoin Strategy ETF (XBTF) is an actively managed fund that offers indirect exposure to Bitcoin investments via an accessible exchange-traded vehicle.
XBTF seeks capital gains through investments in bitcoin futures contracts. Under normal circumstances, the fund invests mostly in standardized, cash-settled Bitcoin futures contracts that are traded on commodity exchanges such as the Chicago Mercantile Exchange (CME).
XBTF also invests its remaining assets in US treasuries, money market funds, cash, and cash equivalents, repurchase agreements, and many more to provide liquidity, serve margin, and collateralize the fund’s investments in Bitcoin futures.
Fund Details:
- Number of holdings – 6
- AUM – $25.9M (As of 4/11/2022)
- Expense Ratio – 0.65%
- Inception Date – 11/15/2021
Whether you invest in crypto ETFs or not is entirely up to you, your investment goals, and your risk profile. Should you decide to add crypto ETFs to your traditional securities portfolio, keep in mind that they are typically risker than index trackers or stocks and bonds ETFs.
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