Crypto ETFs have dominated the lists of top-performing funds so far this year. While past performance does not guarantee future results, investors bullish on cryptocurrencies may want to consider buying crypto ETFs instead of holding specific stocks or cryptocurrencies – it’s much simpler to manage and report taxes!
In this article, we’ll look at some of the top crypto ETFs and their varying levels of exposure to the nascent asset class.
Grayscale Trusts Offer Direct Crypto Exposure
Grayscale Investments is one of the most popular ways to gain exposure to crypto assets, although they are not technically ETFs. With 17 funds and $22.7 billion in assets under management, the asset manager offers direct exposure to various crypto assets, ranging from Bitcoin (
BTC) and Ethereum (
ETH) to Decentraland (
MANA) and Basic Attention Token (
BAT).
Grayscale’s funds deploy capital from accredited and institutional investors to buy and hold cryptocurrencies. Then, the asset manager lists the fund on public stock exchanges where everyday investors can purchase shares. However, these shares may trade at a premium or discount to the value of the underlying cryptocurrency.
Last year, Grayscale attempted to convert its Bitcoin Trust (GBTC) into a spot Bitcoin ETF but the SEC denied the application. After appealing the decision, the firm expects a final ruling from the DC Circuit Court of Appeals later this year. And, ultimately, that decision could impact whether future spot crypto ETFs hit the market.
Moreover, recently Grayscale registered three new ETFs with the SEC, namely:
- Grayscale Ethereum Futures ETF
- Grayscale Global Bitcoin Composite ETF
- Grayscale Privacy ETF
We need to wait and watch SEC’s reaction to gauge the potential of these ETFs.
Crypto Futures ETFs Provide Active Management
Grayscale’s trusts aren’t technically ETFs until the
SEC permits them to convert, and that decision is up in the air. In the meantime, investors can purchase crypto ETFs trading Bitcoin futures contracts. These funds provide indirect exposure and active management to track the underlying cryptocurrency as closely as possible.
List of some popular crypto futures ETFs
|
Name
|
Ticker
|
Type
|
Actively Managed?
|
AUM
|
YTD Ret (%)
|
Expense
|
|
Bitcoin Strategy ETF
|
XBTF
|
ETF
|
Yes
|
$21.1M
|
58.1%
|
0.76%
|
|
Valkyrie Bitcoin Strategy ETF
|
BTF
|
ETF
|
Yes
|
$18.2M
|
56.9%
|
0.95%
|
|
ProShares Bitcoin Strategy ETF
|
BITO
|
ETF
|
Yes
|
$804M
|
-13.1%
|
0.95%
|
These funds hold futures contracts, which typically expire every six months. In theory, the futures contract price should converge on the spot price as expiration approaches. But as the date approaches, the fund must sell the near-term contracts and purchase new contracts that expire later, providing ongoing exposure to crypto prices.
As a result, there’s always a slight difference in performance relative to the underlying cryptocurrency. Historically, that’s been a roughly 5% headwind yearly in the Bitcoin market. However, the difference could be more if and when a pure-play Bitcoin ETF hits the market since it could cause many futures-focused ETF redemptions.
Crypto-Adjacent ETFs for Indirect Exposure
The top-performing crypto ETFs target indirect exposure to the nascent asset class. For example, the Valkyrie Bitcoin Miners
ETF (
WGMI) is one of the best-performing ETFs in the market year-to-date, offering exposure to companies in the Bitcoin mining business. These holdings include everything from chipmakers to actual miners.
List of other top-performing crypto ETFs on a year-to-date basis
|
Name
|
Ticker
|
Type
|
Actively Managed?
|
AUM
|
YTD Ret (%)
|
Expense
|
|
VanEck Digital Transformation ETF
|
DAPP
|
ETF
|
No
|
$17.6M
|
104.9%
|
0.5%
|
|
Global X Blockchain ETF
|
BKCH
|
ETF
|
No
|
$45.2M
|
85.5%
|
0.5%
|
|
Invesco Galaxy Crypto Economy ETF
|
SATO
|
ETF
|
No
|
$2.7M
|
83.2%
|
0.61%
|
|
iShares Blockchain & Tech ETF
|
IBLC
|
ETF
|
No
|
$4M
|
73.7%
|
0.47%
|
These funds have varying levels of exposure to cryptocurrency prices. For example, the iShares Blockchain and Tech ETF (IBLC) holds a 5% stake in NVIDIA Corp. (NVDA) and Advanced Micro Devices (AMD), respectively. As a result, there’s less exposure to cryptocurrency prices or miners than the Valkyrie Bitcoin Miners ETF (WGMI).
The Bottom Line
Investors looking for exposure to cryptocurrencies have plenty of crypto ETF options. Depending on how you classify a ‘crypto’ ETF, there are hundreds of options, spanning spot funds, futures funds, and crypto-adjacent funds. Ultimately, the best choice depends on each investor’s goals, risk tolerance, and preferences.
