The holy grail of the exchange-traded fund (ETF) landscape, at least in recent years, is the bitcoin ETF. It has been several years since the Winklevoss brothers tried to bring the Winklevoss Bitcoin Trust to life, but to date, the Securities and Exchange Commission has yet to approve a bitcoin ETF.
Still, efforts are ongoing to bring a bitcoin ETF to market in the U.S. For their part, the Winklevoss brothers are not giving up. Earlier this year, the U.S. Patent Office granted the Winklevoss brothers an IP patent to potentially operate exchange-traded products linked to cryptocurrencies.
More recently, ETF issuer VanEck and fintech company SolidX filed plans for the VanEck SolidX Bitcoin Trust ETF (XBTC). However, that bitcoin ETF, assuming it even comes to life, would not be attainable by the masses. The VanEck SolidX Bitcoin Trust ETF would be reserved for institutional investors as it is expected to debut, if approved, with a price tag of $200,000.
There is no denying that the demand is there for bitcoin ETFs, meaning that if bitcoin ETFs ever see the light of day, some of the products would likely be successful and the price of the largest digital currency would surge as a result.
Demand is so intense for a bitcoin ETF that during the recently opened comment period for Cboe Global Markets’ effort to list a bitcoin ETF, investors are literally clogging up the SEC’s email system clamoring for a bitcoin ETF.
Until real bitcoin ETFs are approved, U.S. investors will have to make do with the following alternatives:
Bitcoin ETFs: Grayscale Bitcoin Investment Trust (GBTC)
Expense Ratio: 0.02% annually, or $200 per $10,000 investment.
The Grayscale Bitcoin Investment Trust (OTCMKTS:GBTC), which is nearly five years old, “enables investors to gain exposure to the price movement of bitcoin through a traditional investment vehicle, without the challenges of buying, storing, and safekeeping bitcoins,” according to Grayscale.
The $1.13 billion GBTC represents fractional ownership in bitcoin. To be precise, one share of GBTC is equivalent to owning 0.00099 bitcoin.
As its name implies, GBTC is structured as a trust, not a proper bitcoin ETF. Most ETFs are regulated under the Investment Company Act of 1940 (1940 Act), but that is not the structure applicable to GBTC.
Bitcoin ETFs: ARK Web x.0 ETF (ARKW)
Expense Ratio: 0.75%
The ARK Web x.0 ETF (NYSEARCA:ARKW) hails from a family of funds focusing on disruptive, next-generation technologies and several ARK funds have recently been stellar performers. That includes ARKW, which was one of 2017’s best-performing non-leveraged ETFs with a gain of 87.3%.
Bitcoin was a big reason why, even though ARKW is not a bitcoin. ARKW surged last year because one of its largest holdings was the aforementioned GBTC.
Fortunately for investors, ARKW is actively managed and the fund took profits in GBTC. These days, GBTC is a barely noticeable holding in the ARK fund, but ARKW is up more than 27% year-to-date as bitcoin prices have swooned.
Bitcoin ETFs: Reality Shares Nasdaq NexGen Economy ETF (BLCN)
Expense Ratio: 0.68%
In lieu of real bitcoin ETFs, blockchain ETFs are a decent alternative. Blockchain ETFs are not regulated to the degree that bitcoin ETFs are, but the SEC does prevent fund issuers from actually using the term “blockchain” in fund names.
The Reality Shares Nasdaq NexGen Economy ETF (NASDAQ:BLCN) debuted in January, but it is one of the first two blockchain ETFs to launch in the U.S. BLCN tracks the Reality Shares Nasdaq Blockchain Economy Index, which gauges “the returns of companies that are committing material resources to developing, researching, supporting, innovating or utilizing blockchain technology for their use or for use by others,” according to the issuer.
Again, BLCN is not a bitcoin ETF, but the issuer recognizes the opportunity set for blockchain investing as it pertains to cryptocurrencies because members of BLCN’s advisory have extensive digital currency experience.
BLCN holdings include Microsoft (NASDAQ:MSFT), Intel (NASDAQ:INTC) and Square Inc(NYSE:SQ).
Bitcoin ETFs: Reality Shares Nasdaq NexGen Economy China ETF (BCNA)
Expense Ratio: 0.78%
The Reality Shares Nasdaq NexGen Economy China ETF (NASDAQ:BCNA) is the newest member of the blockchain ETF fray, having debuted about a month ago as the first ETF focused on Chinese blockchain investment opportunities.
Obviously, BCNA is not a bitcoin ETF, but the opportunity set is potentially lucrative. Earlier this year, the Peoples Bank of China (PBoC) revealed plans for its own digital currency, DCEP (Digital Currency for Electronic Payment). Additionally, in 2017, China filed for more blockchain-related patents than any other country in the world.
BCNA follows the Reality Shares Nasdaq Blockchain China Index, which “is designed to measure the returns of companies in China that are committing material resources to developing, researching, supporting, innovating or utilizing blockchain technology for their use or for use by others,” according to Reality Shares.
The ETF holds 31 stocks, about three-quarters of which are technology or financial services names.
Bitcoin ETFs: Coinbase Index Fund
Expense Ratio: 0.02%
This is not a bitcoin ETF, either, but it is relatively close. The thing is the Coinbase Index Fund, which recently debuted, is literally not for everyone. This is not your run-of-the-mill index. The 2% annual fee gives that away and the Coinbase Index Fund requires a minimum investment of $250,000.
The Coinbase Index Fund tracks the assets currently available on Coinbase, one of the largest digital currency exchanges. Currently, that list includes bitcoin, ethereum, bitcoin cash and litecoin.
Again, this is not a bitcoin ETF, but bitcoin represents nearly two-thirds of the fund’s weight.
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As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.
