If you’re a digital assets believer, check out these seven crypto ETFs.
Despite a series of high-profile meltdowns in 2022, interest in cryptocurrencies continues to hold strong. Year to date, the price of Bitcoin is up roughly 50% as of Feb. 21, as crypto investors begin to thaw from the severe losses incurred during the 2022 “crypto winter.” However, for new investors looking to explore cryptocurrencies, the barriers to entry can be daunting. The technical know-how required for self-custody and “being your own bank” isn’t for everyone. A way around this is via exchange-traded funds, or ETFs, that track crypto assets. These ETFs can potentially provide greater transparency and regulation compared with regular crypto. But unlike regular crypto, they can also be held in tax-sheltered accounts like a Roth IRA. Here are seven of the best cryptocurrency ETFs to buy in 2023.
ProShares Bitcoin Strategy ETF (ticker: BITO)
The launch of a true U.S. open-end ETF that holds physical Bitcoin continues to elude investors. At the center of this is Grayscale, the creator of the closed-end Grayscale Bitcoin Trust (GBTC), and their continued legal battle against the U.S. Securities and Exchange Commission over the latter’s refusal to convert GBTC into an ETF. In the interim, investors can make do with ETFs like BITO, which offer exposure to Bitcoin via futures contracts. It’s important to note that BITO doesn’t track the actual spot price of Bitcoin. Rather, it tracks the price of future-dated CME Bitcoin index futures. That being said, BITO’s share price has been very closely correlated with Bitcoin’s historically, thus making it a good proxy for exposure. The ETF charges a 0.95% expense ratio.
VanEck Bitcoin Strategy ETF (XBTF)
Another Bitcoin futures ETF available to investors is XBTF. Like BITO, XBTF does not invest in Bitcoin directly. The ETF holds most of its portfolio in U.S. Treasury bills, which are used as collateral for monthly CME Bitcoin futures. This ETF also offers an options chain for investors seeking enhanced exposure. Compared to BITO, XBTF has lower assets under management, or AUM, of $31.4 million, but it also has a lower expense ratio of 0.65%. A notable feature of XBTF is its C-corp structure, which can potentially offer better tax-efficiency.
Global X Blockchain ETF (BKCH)
Investors who aren’t comfortable with owning derivatives can opt for BKCH, which provides exposure to the stocks of companies involved in the cryptocurrency industry. While this approach won’t track the price of Bitcoin or other cryptocurrencies closely, it does provide a high enough correlation. BKCH currently holds a concentrated portfolio of 24 global cryptocurrency equities involved in digital asset mining, blockchain transactions, blockchain hardware and blockchain integration. Notable holdings include Block Inc. (SQ), Coinbase Global Inc. (COIN), Riot Platforms Inc. (RIOT) and Marathon Digital Holdings Inc. (MARA). The fund is dominated by technology and financial sector companies, which account for about 71% and 23% of this ETF, respectively. BKCH charges an expense ratio of 0.5%, which is lower than XBTF and BITO due to the lack of derivatives.
Purpose Bitcoin ETF (BTCC.U)
Up North, Canadian securities regulators made history in 2018 by approving BTCC, the world’s first ETF to hold physically allocated Bitcoin in offline cold storage with a third-party custodian. U.S. investors can take part via BTCC’s U.S. dollar-denominated counterpart, BTCC.U, traded on the Toronto Stock Exchange. As of Feb. 21, one share of BTCC.U corresponds to 0.00018454 Bitcoin, and conversely about 5,418 shares of BTCC.U equate to one Bitcoin. With BTCC.U, investors are able to track the price movements of Bitcoin during trading hours without the use of futures or blockchain industry stocks. BTCC.U charges an expense ratio of 1.49%.
Purpose Bitcoin Yield ETF (BTCY.U)
Investors usually buy Bitcoin with the anticipation of profiting by selling at a higher price. Unlike stocks or bonds, Bitcoin does not pay dividends or interest, so capital gains are the main source of profit. However, there is a way around this with BTCY.U. This ETF holds physical Bitcoin while selling covered call options against it. By doing so, BTCY.U essentially converts the future upside potential of Bitcoin into an immediate cash premium, which is paid out monthly as income. Thanks to Bitcoin’s high volatility, BTCY.U currently pays a strong yield of 9.5%. This makes the ETF a viable alternative for investors who want crypto exposure, but also desire some income. BTCY.U charges a 1.28% management expense ratio.
CI Galaxy Ethereum ETF (ETHX.U)
Crypto investors looking for exposure beyond Bitcoin can consider Ether, colloquially known as Ethereum, which is used in a variety of decentralized finance, or DeFi, applications. Thanks to this Canadian ETF manager, investors can also access Ethereum in ETF form via ETHX.U, which is also traded in U.S. dollars. Like BTCC.U, ETHX.U holds physical Ethereum in offline cold storage with a custodian. As of Feb. 21, a single share of ETHX.U corresponds to 0.003647 Ethereum, and about 274 shares of ETHX.U equates to one Ethereum. ETHX.U currently charges an expense ratio of 0.8%.
CI Galaxy Multi-Crypto ETF (CMCX.U)
Investors looking for a multi-asset crypto ETF might like CMCX.U, which also uses active management to limit risk. This ETF holds a dynamic portfolio that can consist of underlying physical Bitcoin and Ethereum ETFs, in addition to cash. Depending on prevailing market conditions, CMCX.U will adjust its holdings to become more aggressive or defensive using a rules-based, momentum signaling strategy. This is a common trading strategy employed by hedge funds to minimize risk and volatility. Currently, the ETF’s portfolio is split evenly between Bitcoin and Ethereum ETFs as a result of the recent surge in crypto prices. CMCX.U is also traded in U.S. dollars and charges a 1.09% expense ratio.
7 best cryptocurrency ETFs to buy:
— ProShares Bitcoin Strategy ETF (BITO)
— VanEck Bitcoin Strategy ETF (XBTF)
— Global X Blockchain ETF (BKCH)
— Purpose Bitcoin ETF (BTCC.U)
— Purpose Bitcoin Yield ETF (BTCY.U)
— CI Galaxy Ethereum ETF (ETHX.U)
— CI Galaxy Multi-Crypto ETF (CMCX.U)
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7 Best Cryptocurrency ETFs to Buy originally appeared on usnews.com
Update 02/22/23: This story was previously published at an earlier date and has been updated with new information.
