Amidst the chaos and complexity of the crypto market, cryptocurrency ETFs present a unique value proposition that might be the golden ticket to a large-scale capital injection, unlike anything the world of digital currencies has ever seen.
In the eyes of traditional finance, the blockchain industry is uncharted territory, teeming with opportunities and risks that run riot on investors’ fear and greed.
For Wall St fat cats and old-school investors, cryptocurrency market volatility is a roller coaster ride that’s a bit too thrilling. While the profits can be astronomical, the losses can be equally devastating, discouraging big-ticket players from lumping their wealth into crypto.
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What if there was a way to participate in the crypto market, reaping its potential benefits while mitigating risks?
Enter Cryptocurrency ETFs, a sophisticated middle-ground for institutional investors to dip their toes into crypto without needing to check the price of Bitcoin (BTC) and its volatile market cap every few minutes.
This comprehensive guide will highlight some of the best cryptocurrency ETFs available and show why they might better fit your investment style.
Table of contents
What Is a Crypto ETF?
A Crypto ETF, or Cryptocurrency Exchange-Traded Fund, is an investment fund and exchange-traded product that tracks the performance of cryptocurrencies like Bitcoin or Ethereum (ETH). But here’s the twist: instead of buying these digital assets directly and having to navigate the mindnumbing complexities of digital wallets and blockchain explorers, you buy shares of the ETF.
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Some crypto ETFs take this one step further. Instead of holding an indexed portfolio of high-liquidity cryptocurrencies, some crypto ETFs hold stock of blockchain-focused companies, like Coinbase Global (COIN) Bitcoin mining companies..
Crypto ETF shares represent a proportional interest in the ETF’s pool of cryptocurrency assets. The ETF does the heavy lifting of acquiring and managing the cryptocurrencies, and you, the investor, get to ride along, your investment rising and falling in value with the movements of the underlying crypto assets.
Unlike their underlying assets, Crypto ETFs are traded on traditional stock exchanges, meaning you can buy and sell them just like you would shares of a tech company or units of a gold ETF. In the eyes of traditional investors, ETFs are a convenient and accessible way for investors to gain exposure to the whirlwind crypto market without getting their hands too dirty.
Is a Crypto or Bitcoin ETF Right for Me?
A Crypto or Bitcoin ETF might be the right choice for you if you’re intrigued by the potential of cryptocurrencies, but volatile prices and unending scams make you hesitant.
Crypto ETFs offer a more traditional and regulated way to invest in cryptocurrencies. They’re traded on established stock markets and managed by professional fund managers, providing reassurance and stability that direct crypto investments don’t offer.
On top of that, crypto ETFs are ideal for traditional investors who value a diversified portfolio. Many Crypto ETFs track a basket of different cryptocurrencies, not just mainstays like Bitcoin and Ether. This means you can gain exposure to the broader crypto market rather than putting all your eggs in one basket.
Moreover, the U.S. Securities and Exchange Commission will regulate crypto ETFs with far greater clarity than they’ve so far been able to provide for other digital assets, like XRP.
Crypto ETFs are also a good fit for those who prefer passive investing strategies. Once you buy shares in the ETF, the fund manager takes care of the rest, tracking the performance of the underlying crypto assets and adjusting the portfolio as necessary.
Best Cryptocurrency ETFs 2024
Now that we’ve established why investing in crypto ETFs might be a better option for traditional investors than buying spot Bitcoin and other crypto assets, let’s take a look at some of the best cryptocurrency ETFs in the market, their key holdings, and the net assets held by each fund at the time of writing.
1. Amplify Transformational Data Sharing ETF (BLOK)
Known by its ticker BLOK, the Amplify Transformational Data Sharing ETF is a trailblazer in the crypto space, offering exposure to companies actively involved in developing blockchain technologies.
BLOK doesn’t directly invest in cryptocurrencies but focuses on the companies paving the way for the blockchain revolution. This includes crypto industry heavyweights like Coinbase and Micheal Saylor’s MicroStrategy, the largest public company with Bitcoin holdings.
From tech giants diving into blockchain research to startups disrupting industries with innovative blockchain applications, BLOK offers a diversified portfolio that captures the potential of this transformative technology. It’s an excellent choice for investors looking to tap into the broader blockchain ecosystem beyond just cryptocurrencies.
Net Assets: $581 Million USD
Key Assets Under Management
- Coinbase (COIN)
- Microstrategy
- Marathon Digital Holdings
2. Valkyrie Bitcoin Strategy ETF (BTF)
Launched in October 2021, the Valkyrie Bitcoin Strategy ETF has quickly made a name for itself in the crypto ETF space. This actively managed fund aims to spend as close to 100% of its net assets as it can in Bitcoin futures contracts.
Beyond Bitcoin derivatives, the remaining assets are held in U.S. government securities, money market funds, and corporate bonds. BTF, like most of the funds included in this list, aims to invest primarily in Bitcoin futures, offering investors a way to gain exposure to Bitcoin’s price movements without owning the cryptocurrency directly.
The easiest way to think of the Valkyrie Bitcoin Strategy ETF is to imagine an elite team of professional traders expertly swing trading Bitcoin’s peaks and troughs.
Net Assets: $32 Million USD
Key Assets Under Management
- Bitcoin (BTC)
- United States Treasury Bills
- Cash in USD
3. GrayScale Bitcoin Trust (GBTC)
The Grayscale Bitcoin Trust is one of the most popular and widely traded cryptocurrency investment products. It’s not technically an ETF, but it operates similarly. The Trust holds a large amount of Bitcoin, and investors can buy shares of the Trust to gain exposure to Bitcoin’s price movements.
The shares are traded on the over-the-counter market, and the price of each share is influenced by the value of the underlying Bitcoin, as well as market supply and demand. It’s important to note that the price of GBTC shares often deviates from the value of the underlying Bitcoin, which can lead to the shares trading at a premium or discount.
GBTC can be a good option for investors who want exposure to Bitcoin but prefer to invest through a traditional investment product rather than buying and storing Bitcoin directly. The Grayscale Bitcoin Trust has an exceptional record, banking over 19,000% profits since its inception in 2013.
Net Assets: $18 Billion USD
Key Assets Under Management
- Spot Bitcoin
4. Siren Nasdaq NexGen Economy ETF (BLCN)
This ETF is a unique player in the crypto space. Instead of focusing solely on cryptocurrencies, BLCN invests in companies committed to developing, researching, supporting, innovating, or using blockchain technology.
The Siren Nasdaq NexGen Economy ETF’s holdings span multiple sectors, including technology, financials, and communication services, offering a diversified approach to blockchain investment. BLCN is an excellent choice for investors who believe in the transformative potential of blockchain technology and want to invest in the companies leading the charge.
Net Assets: $78 Million USD
Key Assets Under Management
- Microstrategy
- Coinbase
- Block Inc
- Samsung Electronic
5. Global X Blockchain & Bitcoin Strategy ETF (BITS)
Next up is the Global X Blockchain & Bitcoin Strategy fund. This ETF is a hybrid offering exposure to both the blockchain industry and Bitcoin. BITS invests in companies actively involved in the blockchain industry, from hardware manufacturers to software developers.
On top of the safer stuff, the BITS fund offers a Bitcoin futures ETF that allocates a portion of its assets to Bitcoin futures contracts, providing direct exposure to the price movements of the world’s largest cryptocurrency.
This dual strategy makes BITS a unique offering in the crypto ETF space, suitable for investors who want a mix of blockchain and Bitcoin exposure in their portfolio. For those who are more risk-averse, the issuer also offers the Global X Blockchain ETF (BKCH), which has no Bitcoin futures exposure.
Net Assets: $15 Million USD
Key Assets Under Management
- Global X Blockchain ETF
- Bitcoin Futures
6. Bitwise 10 Crypto Index Fund (BITW)
The Bitwise 10 Crypto Index Fund is for the nitty-gritty adrenaline junkies of traditional markets. Betting on traditional companies building in the blockchain industry is one thing, but investing directly in cryptocurrency is where the real action is.
This ETF stands out for those seeking broad exposure to the crypto market. BITW tracks the performance of the Bitwise 10 Large Cap Crypto Index, a basket of the ten largest cryptocurrencies by market capitalization.
The fund’s holdings include heavyweights like Bitcoin and Ethereum and smaller but promising players in the crypto space. By investing in BITW, you’re essentially buying a slice of the top tier of the crypto market, diversified across multiple cryptocurrencies.
This makes BITW an excellent choice for investors who believe in the long-term potential of cryptocurrencies and want to spread their bets across the leading players.
Net Assets: $100 Million
Key Assets Under Management
- Bitcoin
- Ethereum
- Cardano (ADA)
- Solana (SOL)
7. VanEck Bitcoin Strategy ETF (XBTF)
The VanEck Bitcoin Strategy ETF offers investors a way to gain exposure to Bitcoin without the need to directly own or store the digital asset, saving you the hassle of buying BTC through a crypto exchange. XBTF primarily invests in Bitcoin futures contracts, aiming to closely track the performance of the world’s most popular cryptocurrency.
The fund is managed by VanEck, a well-established asset management firm with a history of creating innovative investment products. XBTF is a solid choice for investors who are bullish on Bitcoin and want to participate in its potential upside while benefiting from the risk management and operational efficiencies of an ETF structure.
Net Assets: $43.91 Million USD
Key Assets Under Management
- United States Treasury Bills
- Bitcoin futures contracts
8. Proshares Bitcoin Strategy ETF (BITO)
The Proshare Bitcoin Strategy ETF is one of Wall Street’s oldest and best-known crypto ETFs. In fact, Proshares claims that the BITO fund is the world’s largest Bitcoin-linked ETF.
With over $1B USD in net assets, monthly dividend payments, and a low expense ratio of just 0.95%, the BITO fund is an exceptionally popular choice among investors looking to dip their toes into crypto’s choppy waters.
The fund has also proved attractive for experienced investors. In December 2023, it was announced that Cathie Wood, CEO of Ark Invest, had secured a BITO allocation valued at roughly $92M at the time of purchase.
Net Assets: $1.46 Billion USD
Assets Under Management
- Bitcoin Futures Contracts
- United States Treasury Bills
9. Bitwise Crypto Industry Innovators ETF (BITQ)
While most of the ETFs in this list tend to focus on Bitcoin futures contracts, the Bitwise Crypto Industry Innovators fund comes at things from a slightly different angle. Instead, the BITQ fund invests in crypto companies and stocks, exposing investors to the blockchain industry while avoiding the hassle of handling digital assets directly.
A relative newcomer to the scene, the fund was launched in May 2021 and offers a low expense ratio of as little as 0.85%. The BITQ fund has proved popular across Wall St, attracting plenty of investors as its holdings surged to a net value of over $140M USD.
Net Assets: $140M USD
Top Holdings
- Marathon Digital Holdings
- MicroStrategy
- Coinbase Global
- BitFarms
How to Invest in Cryptocurrency ETFs
Investing in Cryptocurrency ETFs is a straightforward process, especially if you’re already familiar with investing in traditional ETFs. Here’s a step-by-step guide to get you started:
- Open a Brokerage Account
The first step is to open a brokerage account if you don’t already have one. There are many online brokers to choose from, each with its own features and fee structures. Some popular options include Fidelity or Charles Schwab.
- Fund Your Account
You must deposit funds once your account is open. This can usually be done through a bank transfer, wire transfer, or by mailing a check.
- Research Cryptocurrency ETFs
Before you invest, take some time to research the different Cryptocurrency ETFs available. Consider their investment strategy, the cryptocurrencies they track, their fee structure, and their performance history.
- Place an Order
Once you’ve decided on the ETF you want to invest in, you can order through your brokerage account.
- Monitor Your Investment
After executing your order, you’ll own shares in a Cryptocurrency ETF! But the work doesn’t stop there. It’s best to monitor your investment and adjust your strategy as needed regularly.
Remember, Bitcoin and other cryptocurrencies are a high-risk asset class. Just because a respectable financial institution manages an ETF doesn’t mean you’re guaranteed to profit with ETFs.
Pros and Cons of Crypto ETFs
Investing in Crypto ETFs comes with its own set of advantages and disadvantages. Let’s explore some of the key pros and cons:
Pros
- Accessibility – Crypto ETFs are traded on traditional stock exchanges, making them easily accessible to most investors. You don’t need a digital wallet or have to engage with a cryptocurrency exchange to invest.
- Diversification – Many Crypto ETFs offer exposure to different cryptocurrencies or crypto-related businesses, allowing you to diversify your holdings.
- Professional Management – Crypto ETFs are managed by professional fund managers who track the performance of the underlying crypto assets and adjust the portfolio as necessary.
- Regulation – Unlike the unregulated world of cryptocurrencies, ETFs are regulated investment products, providing investor protection.
- Institutional Interest – ETFs simplify investing at scale and might help bring large injections of wealth and capital into the crypto market.
Cons
- Fees – Crypto ETFs have management fees that can eat into your returns. These fees are typically higher than crypto exchange fees.
- Indirect Ownership – When you invest in a Crypto ETF, you don’t actually own the underlying cryptocurrencies. This means you can’t use them for transactions or in DeFi protocols. For many, this defeats crypto’s purpose as an asset class.
On the Flipside
- Cryptocurrency ETFs are a great way to get exposure to the crypto market while blunting some of its volatility. However, they ultimately take control and ownership of assets away from the individual, which goes against the fundamental principles of cryptocurrency.
Why This Matters
Crypto ETFs are expected to bring billions of dollars of institutional capital into the industry by making cryptocurrency more accessible to traditional finance.
FAQs
This depends on your point of view. Arguably, ETFs are good for Bitcoin because they bring deeper liquidity to the market and help stabilize the price of Bitcoin.
Ethereum is available in select cryptocurrency ETFs, like the Bitwise 10 Crypto Index Fund (BITW).
No, a Bitcoin ETF is not the same as Bitcoin. A Bitcoin ETF is a professionally-managed fund of experts trading and investing in Bitcoin. If you invest in a Bitcoin ETF, you invest in the fund’s success.
The approval of a Spot Bitcoin ETF is expected to bring an unprecedented influx of capital into the cryptocurrency market. This is due to the belief that institutional investors who were previously sidelined will have greater access to spot BTC holdings.
