In what feels like somewhat quiet fashion, bitcoin is enjoying an excellent start to 2020. On Jan. 1, the largest digital currency by market value resided around $7,160, but has subsequently vaulted to $9,282 as of Feb. 1.
In the world of exchange traded funds (ETFs), the bitcoin ETF remains elusive. Over the course of 2019, the Securities and Exchange Commission (SEC), as it did in prior years, consistently turned back bitcoin ETF applications. Or fund issuers pulled applications before the commission could deny them.
While some market observers believe progress is being made on a bitcoin ETF, one of the more credible efforts, that of Bitwise Asset Management, was recently yanked, though the firm said it plans to refile at a later date.
Compounding the bitcoin ETF’s woes is a recent survey of venture capitalists, participants in the cryptocurrency universe and other financial services firms indicating that it’s unlikely that a bitcoin ETF gains approval this year.
There are, however, other fund vehicles offering exposure to the premier digital asset. Here are three to consider.
Great Bitcoin Funds: Grayscale Bitcoin Trust (GBTC)
Expense ratio: 2% per year, or $200 on a $10,000 investment.
Debuting in September 2013, the Grayscale Bitcoin Trust (OTC:GBTC) has long been one of the primary fund avenues for accessing the digital currency. Currently, one GBTC share is equivalent to 0.00096772 bitcoin, according to issuer data.
“Grayscale Bitcoin Trust is a traditional investment vehicle with shares titled in the investor’s name, providing a familiar structure for financial and tax advisors and easy transferability to beneficiaries under estate laws,” according to Grayscale.
GBTC recently became officially registered with the SEC. That’s a positive for investors and could have more meaningful implications going forward.
GBTC “is solely and passively invested in Bitcoin, enabling investors to gain exposure to Bitcoin in the form of a security while avoiding the challenges of buying, storing, and safekeeping Bitcoin directly. Now, it is also the first digital currency investment vehicle to attain the status of an SEC reporting company,” said New York-based Grayscale in a statement.
ARK Next Generation Internet ETF (ARKW)
Expense ratio: 0.75%
Prior bitcoin’s late 2018 implosion, the ARK Next Generation Internet ETF (CBOE:ARKW) held a sizable stake in the aforementioned GBTC, but ARK Invest’s management had the foresight to pare that position before the digital asset tumbled.
Today, GBTC is one of the ARK ETF’s 42 holdings, representing just 1.86% of the fund’s weight. ARKW is, however, actively managed so it’s not constrained by an index and can adjust its bitcoin exposure as its managers see fit.
“As an open, neutral, and permissionless global monetary system with no reliance on the State, bitcoin is in a good position to win this battle,” said ARK in a recent research piece. “If it does, ARK believes the result will be measured in trillions, more than an order of magnitude higher than its $150 billion network value today.”
GBTC could be a nice perk for ARKW, but these days, the ETF is known for its almost 11% allocation to Tesla (NASDAQ:TSLA), one of the largest weights to the high-flying electric vehicle maker among all ETFs.
Amplify Transformational Data Sharing ETF (BLOK)
Expense ratio: 0.70%
The Amplify Transformational Data Sharing ETF (NYSEARCA:BLOK) is the least direct play on bitcoin of the funds highlighted here. Rather, BLOK is one of several ETF avenues to the blockchain, the technology underpinning bitcoin.
Like ARKW, BLOK is actively managed, giving it the ability to touch multiple corners of the blockchain universe. For example, BLOK features exposure to 15 industry groups spread mostly across the communication services, financial services and technology sectors. There are myriad uses for blockchain technology beyond the crypto space and those opportunities could underpin significant growth for the underlying market and BLOK as well.
“Forecasts suggest that global blockchain technology revenues will experience massive growth in the coming years, with the market expected to climb to over 23.3 billion U.S. dollars in size by 2023,” notes Statista. “The financial sector has been one of the quickest to invest in blockchain, with over 60 percent of the technology’s market value concentrated in this field.”
BLOK holds 56 stocks, including Dow components International Business Machines (NYSE:IBM), Microsoft (NASDAQ:MSFT) and Goldman Sachs (NYSE:GS), but those exposures are balanced with mid-cap and international equities, among others.
As of this writing, Todd Shriber did not own any of the aforementioned securities.