Crypto ETFs give crypto investment a more traditional feel. Every day, the number of cryptocurrencies and crypto-related investments available on the market increases. Investing in a cryptocurrency ETF allows investors to quickly access crypto assets while limiting risk through the ETF’s diverse features, rather than assuming a concentrated risk by going “all in” with one individual crypto investment. To varying degrees, each fund’s investments are related to digital assets or blockchain technology, but the fortunes of crypto ETFs are tied to the performance of key cryptocurrencies. There are a number of cryptocurrency-themed ETFs available, but bare in mind that they typically have high management fees.
In this article, we discuss the top 5 crypto ETFs, but we do not provide investment management advice, and anyone who buys anything we recommend is solely responsible for the money they make or lose.
Which factors are considered when evaluating a crypto ETF?
Because most ETFs’ purpose is to follow an index, you can evaluate an ETF’s efficiency by comparing the fee rate it charges to how efficiently it tracks or replicates its index’s performance. ETFs that charge modest fees and closely track their indices are very efficient and effective.
There are two kinds of ETFs. Some are formed as corporations for tax efficiency, while others are established as Registered Investment Companies.
The tracking outcomes of a fund should be prioritized. The tracking difference is a measurement that looks at how far an ETF is behind its benchmark on average over a one-year period. The effects of a wide range of management decisions, from securities lending to optimization decisions, are included in the tracking difference.
Before investing in a crypto ETF, be sure it is legitimate. This can be accomplished by reviewing investor ratings and comparing metrics to see if they all add up. Also, make sure it doesn’t have any counterparty concerns that would make it unownable.
Amplify Transformational Data Sharing ETF (BLOK)
BLOK is an actively managed exchange-traded fund that invests at least 80% of its net assets in stocks of firms that develop and use blockchain technologies. The fund’s investments will provide “indirect crypto exposure” to investors. It employs a hybrid strategy, investing in a mix of value and growth securities with varying market capitalizations from throughout the world, with a focus on software, capital markets, and IT services companies.
The Amplify Transformational Data Sharing ETF has a high level of liquidity, with over 270,526 shares traded every day. It has an annual dividend yield of $0.66 per share. This ETF has a one-year return rate of more than 90%. Its top 3 holdings include Silvergate Capital Corporation, CME Group Inc, and SBI Holdings.
Siren Nasdaq NexGen Economy ETF (BLCN)
The BLCN is a passively managed ETF that tracks the performance of the Nasdaq Blockchain Economy Index, which is made up of stocks that promote or use blockchain technology in their operations.
It began operations in January 2018, and it has over 60 holdings. The index begins with all companies with a market capitalization of more than $200 million that exhibit blockchain company characteristics. It then assigns them a blockchain score, which is the index’s own screening mechanism for evaluating each company’s ability to benefit from blockchain technologies.
The ETF has a good level of diversification. The top ten holdings account for only 21% of the fund’s total assets, but this one has a lot of blue-chip heft. Its top 3 holdings include Coinbase Global Inc, Marathon Digital Holdings Inc, and American Express Company.
Bitwise 10 Crypto Industry Innovators ETF (BITQ)
Launched in 2017, the Bitwise 10 Crypto Index Fund tracks the performance of the Bitwise 10 Large Cap Crypto Index, which represents the ten largest investable cryptocurrencies. These ten coins account for 70% of the entire cryptocurrency market.
Bitcoin contributes 61% of the portfolio since BITW is weighted by market capitalization. In December 2020, BITW became accessible over the counter. Due to the fact that this fund trades over the counter, it can sometimes trade at a significant discount or premium to the underlying crypto values it owns, depending on share demand. Investors should proceed with caution, though. It started with just $120 million in assets and has roughly seven times that in less than a year, demonstrating how popular these assets have grown.
Its top 3 holdings include Riot Blockchain Inc RIOT, Bakkt Holdings Inc, and Marathon Digital Holdings Inc.
First Trust Indxx Innovative Transaction & Process ETF (LEGR)
The LEGR is a cryptocurrency ETF that was launched in 2018. It measures the performance of the Indxx Blockchain Index, a stock market index that analyzes companies with a blockchain connection – and it has a unique weighting mechanism.
The LEGR index considers all publicly traded blockchain companies and guarantees that each one meets a certain size, liquidity, and trading requirements. It then assigns a score of 1 to companies that are actively developing blockchain technology, 2 to companies that are actively employing blockchain technology, and 3 to companies that are actively researching blockchain technology.
The index then only includes companies with a score of 1 or 2, with companies with a score of 1 receiving 50% of the weighting and those with a score of 2 receiving 50% of the weighting. Companies that receive a score of 3 are automatically disqualified. Its top holdings include Oracle Corp, Microsoft Corp, and PayPal Holdings Inc.
Global X Blockchain & Bitcoin Strategy ETF (BITS)
The Global X Blockchain & Bitcoin Strategy ETF is a fund that provides investors with regulated futures market access to Bitcoin. BITS is a much smaller Bitcoin fund with only $7.5 million in assets. BITS does not invest directly in Bitcoin or blockchain startups. Rather, the fund invests in Bitcoin futures contracts that are listed in the United States and gains exposure to firms through other ETFs such as the Global X Blockchain ETF. This method exposes investors to companies that use blockchain technology and digital assets to create revolutionary products. BITS has a 0.65% competitive expense ratio.
Its top 3 holdings include Global X Blockchain ETF, Bitcoin Futures CME (Apr′22), and Bitcoin Futures CME (May′22).
ETFs allow you to invest in a variety of cryptocurrencies while avoiding the high fees charged by exchanges and wallets. These ETFs offer more secure and trustworthy diversification across several cryptocurrencies and the various companies involved in blockchain technology. Before you invest in them, make sure they meet all of the requirements. In this article, we discussed the top ETFs by market capitalization.