These crypto ETFs are worth your time.
The cryptocurrency market hasn’t been in the best shape recently. With Bitcoin (BTC) and Ether (ETH) trading in bear market territory, exchanges like Celsius and Voyager filing for Chapter 11 bankruptcy, and the demise of crypto hedge fund 3 Arrows Capital, there were no shortages of negative catalysts to pummel investors. Still, as many crypto veterans know, a “hold” mentality can lead to great returns during the next bull market. Investors who can tolerate the high volatility and risk of the cryptocurrency market have a variety of options for their holdings. The most regulated approach that can be implemented in most brokerage accounts is via a cryptocurrency exchange-traded fund, or ETF. These funds can hold cryptocurrency futures contracts or miner stocks, or for non-U.S. ETFs, spot cryptocurrency in offline storage. Here are the seven best cryptocurrency ETFs to buy in 2022.
ProShares Bitcoin Strategy ETF (ticker: BITO)
BITO provides exposure to Bitcoin via a portfolio of futures contracts. These are derivatives that bet on the future anticipated price of Bitcoin. For this reason, BITO’s ability to track the spot price of Bitcoin isn’t 100% accurate, but it’s close enough for most swing traders and buy-and-hold investors. Like most futures-based ETFs, the fund holds a variety of Treasury bills as collateral for the futures contracts it enters into. Because the ETF is actively managed, the expense ratio is quite high, at 0.95%. This works out to about $95 in annual fees for a $10,000 investment. Still, investors wary of self-custody for Bitcoin and suspicious of crypto exchanges may find this a worthwhile trade-off.
Grayscale Bitcoin Trust (GBTC)
GBTC isn’t technically an ETF. Rather, it’s a closed-end trust. The fund offers exposure to Bitcoin by holding deposits in offline storage, known as cold wallets. The fund has over $13 billion in assets under management, or AUM, and 692 million shares outstanding. This corresponds to about 0.00092121 Bitcoin per share as of this writing. Because GBTC is a closed-end trust, there is a risk of its share price trading at a premium or discount to its net asset value, so investors should be careful of this. Recently, the SEC struck down an application by Grayscale to convert GBTC into ETF form, with further litigation pending. GBTC charges a rather hefty expense ratio of 2%.
Global X Blockchain & Bitcoin Strategy ETF (ticker: BITS)
BITS combines the futures-based approach of BITO with select investments in blockchain companies. As of late July, 47% of the ETF is held in the Global X Blockchain ETF (BKCH), while the remainder is in cash collateral for Bitcoin futures. The underlying BKCH tracks the Solactive Blockchain Index and holds stocks like Marathon Digital Holdings In. (MARA), Riot Blockchain Inc. (RIOT), and Coinbase Global Inc. (COIN). Compared to “pure” Bitcoin ETFs, BITS is more likely to be correlated with the stock market due to its equity holdings. Think of it as like a gold miner stock ETF. Compared to the previous options, BITS is also slightly cheaper, with a 0.65% expense ratio.
Purpose Bitcoin ETF (BTCC.U)
North of the border in Canada, various cryptocurrency ETFs have been approved by regulators. These are true open-ended funds that hold corresponding, audited deposits of Bitcoin in secure offline storage with a custodian. The first to debut was BTCC, which has since grown to become the most liquid and popular option. BTCC also comes in a .U version, which stands for U.S. dollar-denominated. As a result, U.S. investors can buy the .U version to hold spot Bitcoin without the need for currency conversion costs. As of late July, the .U version holds 0.00018623 Bitcoin per share and costs a gross expense ratio of 1.0%, capped to a maximum of 1.5%.
CI Galaxy Ethereum ETF (ETHX.U)
The second-largest cryptocurrency by market cap and representing the versatile Ethereum blockchain, Ether can also be purchased in spot ETF form. Compared to Bitcoin, the Ethereum network is much more widely used, with applications in decentralized finance, or DeFi; non-fungible tokens, or NFTs; and smart contracts. As an investment, it is also more volatile than Bitcoin and has a lower price per token. Investors can gain exposure to Ether via ETHX.U, which is essentially BTCC.U but for Ether. The ETF holds 0.003655 Ether per share and has attracted $390 million in AUM. Compared to BTCC.U, ETHX.U is also significantly cheaper, with a net expense ratio of 0.7%.
Purpose Bitcoin Yield ETF (BTCY.U)
Crypto investors hungry for passive income can use a Bitcoin covered-call ETF like BTCY.U. BTCY.U is essentially BTCC.U, but with a covered-call overlay. The fund manager sells an option known as a covered call for a cash premium, which is converted into monthly income for the ETF holder. Essentially, BTCY.U sells the future upside gains of Bitcoin into immediate cash income. Thus, investors can expect BTCY.U to have lower total returns but better yields, which can be suitable for income investors. The yield stands at an incredible 17% thanks to the high volatility of the underlying Bitcoin, which increases options premiums. BTCY.U costs an expense ratio of 1.4%.
CI Galaxy Multi-Crypto ETF (CMCX.U)
Investors looking for hedge-fund-like strategies with their cryptocurrency investments can consider CMCX.U. The ETF employs a systemic trend-following strategy using technical indicators like relative strength, Bollinger bands and simple moving averages that are often used to trade based on momentum. CMCX.U holds an equal-weight allocation to Bitcoin and Ether. During bull markets, CMCX.U will deploy 100% of its investable cash into both assets for a 50/50 split. If momentum fades and technical indicators start to signal the end of a bull market, the ETF goes into a defensive posture by deploying 50% of its capital in cash. During bear markets, 75% of the ETF is held in cash. This is a risk-on, risk-off strategy often used by advanced traders. CMCX charges a 0.50% expense ratio.
7 best cryptocurrency ETFs to buy:
— ProShares Bitcoin Strategy ETF (BITO)
— Grayscale Bitcoin Trust (GBTC)
— Global X Blockchain & Bitcoin Strategy ETF (BITS)
— Purpose Bitcoin ETF (BTCC.U)
— CI Galaxy Ethereum ETF (ETHX.U)
— Purpose Bitcoin Yield ETF (BTCY.U)
— CI Galaxy Multi-Crypto ETF (CMCX.U)
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7 Best Cryptocurrency ETFs to Buy originally appeared on usnews.com
Update 07/25/22: This story was published at an earlier date and has been updated with new information.
