What is an ETF?
ETFs (exchange -traded funds ) are funds that are traded directly on an exchange and track a specific index. Investing in an ETF is like investing in a group of assets that you can complete, expand or sell whenever you want.
But in practice, what are the advantages of a crypto ETF? Crypto ETFs work like conventional ETFs, except that the indices refer to companies specializing in cryptocurrencies. This has a number of advantages:
- Diversification: Investing in a cryptocurrency ETF means investing in a number of quality companies and projects.
- Risk distribution: Asset diversification helps limit risk, especially in the event of a market downturn.
- Reduced costs: Investing in a crypto ETF also reduces costs associated with buying and selling fees and stock trading.
- Profitability: In general, cryptocurrency ETFs offer attractive returns, especially over the long term.
What are the best cryptocurrency ETFs?
There are many options, but here we are going to look at the ten best ETFs to invest in.
Most of these crypto ETFs are based on cryptocurrency futures contracts, as US authorities have not yet approved ETFs based on actual crypto assets.
1. ProShares Bitcoin Strategy ETF
The first crypto ETF on our list is the ProShares Bitcoin Strategy ETF (BITO). Why? Historically, it was the first crypto ETF to be accepted in the United States. It started trading on the exchanges in October 2021.
What makes it special? Well, it doesn't invest directly in cryptocurrencies (specifically Bitcoin). Instead, the fund aims to provide returns through exposure to Bitcoin futures. Many now see it as a substitute for real assets like gold and other commodities.
Pros:
- Bitcoin Exposure: The ProShares Bitcoin Strategy ETF (BITO) offers investors an opportunity to gain exposure to the returns of Bitcoin without having to directly own the cryptocurrency.
- The first and largest Bitcoin-related ETF in the United States: BITO is the first Bitcoin-related ETF in the United States and the largest in terms of assets under management, according to Bloomberg.
- Liquidity: With a high trading volume (20,880,230 securities traded), this ETF offers significant liquidity to investors.
Cons:
- Market Risk: As with any cryptocurrency investment, there is market risk associated with the volatility of the Bitcoin price.
- No direct ownership of Bitcoin: The ETF provides exposure to Bitcoin returns, but investors do not actually own Bitcoin.
- Past Performance: Although BITO has experienced ups and downs, it hit a 52-week low of $12.06, which may be worrying to some investors looking for stability.
2. Bitwise ETF
The second option on this list is the Bitwise Crypto Industry Innovators ETF (BITQ). This platform tracks the performance of the Bitwise Crypto Innovators 30 Index, an index composed of 30 stocks of “classic” companies, but which are directly involved in the crypto sector.
The nature of these companies is very diverse. There are mining specialists, mining equipment suppliers and companies specializing in financial services. Recently, the company had large positions in MicroStrategy, Michael Saylor's firm, Coinbase and Galaxy Digital, a digital asset investment management company.
Pros:
- Diversified Exposure to Cryptocurrencies: Bitwise offers a variety of ETFs that provide exposure to various cryptocurrencies, including Bitcoin and Ethereum, as well as other digital assets.
- Innovation: Bitwise is a pioneer in creating ETFs focused on cryptocurrencies and the digital economy, which can be attractive to investors interested in innovative companies.
- Exposure to Web3 companies: The BWEB fund offers pure exposure to leading Web3 companies in a traditional ETF format.
Cons:
- Market Risk: Like all cryptocurrency investments, Bitwise ETFs are subject to volatility in the cryptocurrency market, which may result in losses for investors.
- Management Fees: Bitwise ETFs have management fees that may reduce overall returns for investors.
- Sector Exposure: Bitwise ETFs have significant exposure to the cryptocurrency sector, which may increase risk compared to more diversified investments.
3. Valkyrie Bitcoin Strategy ETF
Valkyrie Bitcoin Strategy ETF (BTF) invests primarily in Bitcoin futures. A crypto ETF that has been able to outperform in recent months, unlike others that have been affected by the fall of the cryptocurrency market and technology in general.
This is an ETF whose main exchange is the NASDAQ and that really deserves our attention… To the point of investing? You will have to decide that by doing your own research.
Pros:
- Bitcoin and Ethereum Exposure: The Valkyrie Bitcoin and Ether Strategy ETF offers investors exposure to the returns of Bitcoin and Ethereum without needing to directly own the cryptocurrencies.
- Actively Managed: This is an actively managed ETF that seeks to provide capital appreciation by investing primarily in Bitcoin and Ethereum futures contracts.
- CoinShares Acquisition: CoinShares' recent acquisition of Valkyrie Funds could bring new opportunities and additional expertise to the ETF.
Cons:
- Market Risk: As with any cryptocurrency investment, there is market risk associated with the price volatility of Bitcoin and Ethereum.
- No direct ownership of Bitcoin or Ethereum: The ETF offers exposure to the returns of Bitcoin and Ethereum, but investors do not directly own these cryptocurrencies.
- Management Fees: As with any actively managed fund, there are associated management costs that may reduce the fund's overall returns.
4. FNB Amplify Transformational Data Sharing
Amplify Transformational Data Sharing ETF (BLOK) is one of the most prominent cryptocurrency ETFs on the market, if not the most prominent, at least at the moment.
An investment fund that has been able to select some of the most involved and successful companies in the blockchain sector, to offer investors returns that some would describe as quite attractive. Among the ETF's main holdings are NVIDIA (NVDA), Coinbase Global (COIN), SBI Holdings, CME Group (CME), and Silvergate Capital (SI).
Pros:
- Blockchain Technology Investment: The Amplify Transformational Data Sharing ETF is one of the few funds that invest in companies involved in blockchain, offering unique exposure to this innovative technology.
- Actively managed: This is an actively managed ETF that seeks to provide total return by investing at least 80% of its net assets in company stocks.
- Accessibility: Shares can be bought and sold on the secondary market, giving investors some flexibility.
Cons:
- Costs and Expenses: As with any actively managed fund, there are costs and expenses associated with managing the fund that may reduce total returns.
- Sector Exposure: The ETF has a strong exposure to the blockchain technology sector, which may result in higher volatility and risk compared to more diversified funds.
- Investment risk: The fund invests in companies that use or develop blockchain technology, a sector that is still developing and therefore potentially risky.
5. Grayscale Bitcoin Trust
Launched in 2013, the Grayscale Bitcoin Trust (GBTC) was one of the first crypto ETFs to see the light of day. That was back in 2013. And since then? The fund has generated returns of over 28,000%. That sure attracts investors. The result? $28 billion in assets under management, making it one of the largest cryptocurrency funds on the market.
But beware: the fund is open to investors willing to put up a minimum of $50,000. However, GBTC shares are available to everyone on the secondary market, via an online broker. A very popular ETF that internet users love to dissect and study, especially on social media.
Pros:
- First Bitcoin ETF on the market: GBTC is one of the first Bitcoin ETFs on the US market, meaning it has a long history and some credibility compared to other newer funds.
- Direct Exposure to Bitcoin: GBTC offers direct exposure to Bitcoin, without investors needing to directly own or manage the cryptocurrency.
- Management by Grayscale Investments: Grayscale Investments, the manager of GBTC, is the largest crypto asset manager in the world, which offers some security in terms of asset management and security.
Cons:
- Potentially high premiums: GBTC has sometimes been criticized for its high premiums compared to the price of Bitcoin. This means that investors may pay more for exposure to Bitcoin through GBTC than by purchasing the cryptocurrency directly.
- Growing Competition: With the introduction of new Bitcoin ETFs, such as those from BlackRock and Fidelity, GBTC faces increasing competition, which could affect its performance and attractiveness to investors.
- Bitcoin Volatility: Because GBTC is directly exposed to Bitcoin, it is also subject to the volatility of this cryptocurrency. This means that the price of GBTC can fluctuate considerably, which could result in investment losses.
6. VanEck Digital Transformation ETF
Launched in April 2021, the VanEck Digital Transformation ETF (DAPP) is a cryptocurrency ETF that tracks the performance of the MVIS Global Digital Assets Equity Index. In total, DAPP has invested in no less than 25 projects, including Coinbase (which seems to be one of the favorite stocks for cryptocurrency ETFs), Block (formerly Square, the company created by Twitter founder Jack Dorsey) and Silvergate Capital Corp (SI).
This ETF also has an international focus, with almost 50% of its holdings outside the United States.
Cons:
- Exposure to digital assets: DAPP offers exposure to a variety of companies involved in the digital transformation of the global economy, including those working with blockchain and cryptocurrencies.
- Tracking the MVIS Global Digital Assets Equity Index: The fund seeks to replicate as closely as possible, before costs and expenses, the price and performance of the MVIS Global Digital Assets Equity Index, which may provide sector diversification.
- Recent growth: The fund has surpassed $100 million in assets under management, demonstrating continued growth.
Pros:
- Technology risk: The fund invests primarily in companies that develop or use digital transformation technologies, which may entail higher risk due to the rapid evolution and inherent uncertainty of these technologies.
- Sector concentration: The fund focuses primarily on companies involved in digital transformation, which may limit diversification and increase risk if this sector is affected by unfavorable market conditions.
- Management costs: As with any ETF, there are associated management costs that may reduce total returns for investors.
7. Global X Blockchain and Bitcoin Strategy ETF
Another of the best ETFs to invest in is the Global X Blockchain and Bitcoin Strategy ETF (BITS). Although it has been affected by the recent setbacks in the cryptocurrency and technology markets, it remains interesting and very solid.
Its portfolio includes companies specializing in blockchain, as well as Bitcoin futures. A bit of everything, then, for a varied and diversified investment.
Created in November 2021, this crypto ETF is one of the most attractive for long-term investors.
Pros:
- Exposure to Blockchain and Bitcoin: BITS offers exposure to both blockchain and Bitcoin, allowing investors to benefit from the long-term growth opportunities of these two disruptive technologies.
- Active Management: As an actively managed fund, BITS has the potential to outperform benchmarks by quickly adjusting its portfolio to changing market conditions.
- Investment in US and Non-US Companies: The fund invests in both US and non-US companies, providing geographic diversification to investors.
Cons:
- Technology Risk: Since BITS invests primarily in blockchain and Bitcoin-related companies, it is subject to the volatility and risks inherent in these technologies, which may result in losses for investors.
- Exposure to Bitcoin futures: The fund seeks to gain exposure to Bitcoin, in whole or in part, through investments in a subsidiary established in the Cayman Islands. This may entail additional risk due to the volatility of Bitcoin futures contracts.
- Management costs: As with any ETF, there are associated management costs that may reduce total returns for investors.
8. Siren Nasdaq NexGen Economy ETF
The Siren Nasdaq NexGen Economy Crypto ETF (BLCN) has a wide selection of securities in its portfolio that are closely linked to cryptocurrencies and, going a little further, to the banking, digital and digital revolution sectors. Its main securities? Coinbase (COIN), American Express (AXP), Mastercard (MA), Accenture (ACN) and Marathon Digital (MARA).
This is an interesting selection, which seems aimed at traders who want to position themselves in bank stocks that are likely to perform or are already working on cryptocurrency projects.
Pros:
- Blockchain Exposure: BLCN invests in companies that develop, research or use blockchain technologies, offering investors direct exposure to this growing sector.
- Tracking the Nasdaq Blockchain Economy Index: The fund seeks to replicate as closely as possible, before costs and expenses, the performance of the Nasdaq Blockchain Economy Index, thereby providing sector diversification.
- Asset Diversification: The fund's top 10 holdings account for just 35.50% of its total portfolio, indicating that it is well diversified across different companies.
Pros:
- Technology Risk: Since BLCN invests primarily in blockchain-related companies, it is exposed to the volatility and risks inherent in this technology, which could result in losses for investors.
- Recent performance: The fund has seen a decline of 8.94% over the past year, which could be a cause for concern for investors.
- Management costs: As with any ETF, there are associated management costs that can reduce total returns for investors. While exact costs are not mentioned in the research, they are an important consideration for any ETF investment.
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