2021 was a historic year for cryptos as well as exchange-traded funds (ETFs) that give access to digital assets. These new breed of ETFs have further fueled the mainstream adoption of cryptos as well as the blockchain technology behind them. Now investors can use their regular brokerage accounts to participate in the growth of the crypto space.
For instance, in October, following its listing, it took just two days for the ProShares Bitcoin Strategy ETF (NYSEARCA:BITO) to amass $1 billion under management. As a result, the BITO fund became one of the hottest ETF launches on record.
According to Bloomberg Intelligence data, the number of crypto-tracking investment vehicles worldwide more than doubled to 80 in 2021. A year ago, there had been 35. Additionally, assets soared to $63 billion, compared to $24 billion at the start of 2021.
As most InvestorPlace.com readers would well know, a number of these funds are based on Bitcoin (CCC:BTC-USD) futures. Therefore, they track contracts that speculate on the future price of Bitcoin rather than the spot price of the digital asset.
Such future funds needs to be rolled forward by asset managers — usually monthly. Futures-based ETFs typically trade “in contango,” which means the future prices is higher than the spot price. And the monthly rolling and the contango risk mean futures-based ETFs lose at least 5%-8% in value every year — if not more.
In addition to the performance tag of the futures curve, these ETFs tend to have a high annual expense ratio as well. Thus, ETFs based on futures may not be appropriate for most investors due to their high volatility and significant costs that are associated with futures-based funds in general.
We should also note that in addition to the declines we’ve seen in broader assets since the start of 2022, cryptos are also falling fast. For instance, BTC-USD and Ethereum (CCC:ETH-USD) are down 20% and 30% so far in 2022. Understandably, for long term crypto bulls, such price drops offer buying opportunities.
With that said, here are seven ETFs that could appeal to cryptos and blockchain bulls in 2022:
- Amplify Transformational Data Sharing ETF (NYSEARCA:BLOK)
- Bitwise Crypto Industry Innovators ETF (NYSEARCA:BITQ)
- First Trust SkyBridge Crypto Industry and Digital Economy ETF (NYSEARCA:CRPT)
- Global X Blockchain ETF (NASDAQ:BKCH)
- ProShares Bitcoin Strategy ETF (NYSEARCA:BITO)
- Siren Nasdaq NexGen Economy ETF (NASDAQ:BLCN)
- Valkyrie Bitcoin Strategy ETF (NASDAQ:BTF)
52-Week Range: $29.23 – $64.91
Expense Ratio: 0.71%
The Amplify Transformational Data Sharing ETF is one of the largest blockchain funds based on assets. It is actively managed, investing at least 80% of assets in companies involved in developing and utilizing blockchain technologies. Put another way, it does not hold cryptos directly.
BLOK started trading in January 2018, and provides considerable diversity within the blockchain space with 47 total holdings. 38.1% of total assets are mid-capitalization (cap) stocks; 36.8% are large-caps, and 24.8% are small-caps. Its top 10 holdings account for around 41% of net assets of $913.9 million.
In terms of industry allocation, software stocks account for 27.9% of the fund, followed by capital markets (22.0%) and I.T. services (19.5%). The leading names in the fund include Japanese financial services company SBI Holdings (OTCMKTS:SBHGF); leading cryptocurrency exchange Coinbase Global (NASDAQ:COIN); commodities exchange CME Group (NASDAQ:CME); leading semiconductor designer Nvidia (NASDAQ:NVDA); and investment management company Galaxy Digital (OTCMKTS:BRPHF).
BLOK hit an all-time high (ATH) of $64.91 on Nov. 9. But the new year has recently brought a 52-week low around $32. As a result, the fund is down 19% year-to-date (YTD).
Bitwise Crypto Industry Innovators ETF (BITQ)
52-Week Range: $13.40 – $35.68
Expense Ratio: 0.85%
Our next fund could be appropriate for those that want to participate on the growth of the crypto economy. The Bitwise Crypto Industry Innovators ETF offers exposure to the companies that build the crypto infrastructure, including Bitcoin miners as well as digital trading platforms.
BITQ tracks the performance of the Bitwise Crypto Innovators 30 Index. 85% of the index holdings are made up of “crypto innovators.” These names generate most of their revenue from the cryptocurrency space or hold a substantial amount of Bitcoin and altcoins on their balance sheets.
The fund, which started trading in May 2021, has 30 holdings. Assets under management stand at $108.9 million, while the top 10 stocks account for 64% of total assets.
Among the leading names on the roster are Coinbase Global with 11.34%, followed by the bank and crypto trading platform operator Silvergate Capital (NYSE:SI) with 9.53% and the analytics software group Microstrategy (NASDAQ:MSTR) with 9.23%.
BITQ initially started trading around $16.50. On Nov. 9, the fund saw an ATH of $35.68. Yet it is now at a record low at around $15, down about 26% YTD.
Cryptos: First Trust SkyBridge Crypto Industry and Digital Economy ETF (CRPT)
52-Week Range: $11.16 – $27.56
Expense Ratio: 0.85% per year
The First Trust SkyBridge Crypto Industry and Digital Economy ETF provides exposure to businesses at the center of the new digital economy. They include crypto miners and mining equipment providers, financial technology (fintech) names, asset managers, and trading platforms.
CRPT started trading in September 2021, and assets under management stand at $43.7 million. The fund consists of a concentrated portfolio of 29 holdings, where the leading 10 stocks account for around 65% of assets.
In terms of the sub-sectoral breakdown, the software sector makes up the largest portion, followed by the capital markets, I.T. services, and banks. As top names, we see Coinbase Global; cryptocurrency miners Bitfarms (NASDAQ:BITF), Riot Blockchain (NASDAQ:RIOT), and Marathon Digital (NASDAQ:MARA); and MicroStrategy.
On Nov. 9, CRPT hit an ATH of $27.56. Now, it is around $12.50, down about 24% YTD.
Global X Blockchain ETF (BKCH)
52-Week Range: $13.90 – $41.25
Expense Ratio: 0.50% per year
The Global X Blockchain ETF also provides exposure to businesses that advance or benefit from blockchain technologies. It tracks the performance of the Solactive Blockchain Index,
BKCH which started trading in July 2021, has 25 holdings. The top 10 stocks account for almost three-quarters of net assets of $114 million. Put another way, it is a top-heavy fund.
Information technology is the largest sector by far, with 73.7% of assets. Next are by financials (18.7%) and communication services (2.6%). The leading names on the roster include Coinbase Global with 13.61%, followed by Bitcoin miners Riot Blockchain and Marathon Digital, Germany-based IT specialist Northern Data (OTCMKTS:NDTAF), and digital asset broker Voyager Digital (OTCMKTS:VYGVF).
On Nov. 9, BKCH saw an ATH of $41.25. However, now we’re seeing record lows around $16, down 26% YTD.
Cryptos: ProShares Bitcoin Strategy ETF (BITO)
52-Week Range: $20.90 – $44.29
Expense Ratio: 0.95%
As we have already noted, in October 2021, the ProShares Bitcoin Strategy ETF started trading as the first Bitcoin futures-linked fund stateside.
Despite the high volatility and recent sell-off in Bitcoin prices, assets under management still stand around $1.05 billion. Understandably, the ETF wrapper makes Bitcoin more accessible to long-term investors, offering them a convenient way to invest in the asset class via regular brokerage accounts.
BITO opened at $40.88. Then, on Nov. 10, it saw an all-time high of $44.29. But 2022 has recently brought a record low of $23.97 on Jan. 26, down 17% YTD.
Siren Nasdaq NexGen Economy ETF (BLCN)
52-Week Range: $35.71 – $53.31
Expense Ratio: 0.68%
The Siren Nasdaq NexGen Economy ETF is a passively managed fund that tracks the Nasdaq Blockchain Economy Index, focusing on stocks that develop or utilize the blockchain technology.
BLCN started trading in January 2018. With 64 holdings, the ETF is well diversified compared to its peers. The top 10 stocks account for just 20% of its total net assets of $218 million. As the fund is almost equally divided between U.S.-based and international companies, there is also geographic diversification.
In terms of industry allocation, technology stocks account for 42.42% of the fund, followed by financials (36.1%) and communications (8.34%). Among the top names are well-known tech giants such as IBM (NYSE:IBM), Baidu (NASDAQ:BIDU), JD.com (NASDAQ: JD), and Tencent (NYSE:TME).
In March 2021, BLCN saw an ATH of $53.31. However, with this year’s sell-off in the crypto space, the fund trades around $38 territory.
Cryptos: Valkyrie Bitcoin Strategy ETF (BTF)
52-week Range: $12.94 – $27.27
Expense Ratio: 0.95% per year
The Valkyrie Bitcoin Strategy ETF is an actively managed fund that invests primarily in Bitcoin futures contracts. In other words, like BITO, this fund also does not directly invest in Bitcoin. Instead, BTF tracks the value of Chicago Mercantile Exchange Bitcoin futures. Its portfolio also includes corporate bonds, treasuries, and cash.
BTF started trading on Oct. 22, a few days after BITO was launched on the New York Stock Exchange. This fund is smaller and less liquid than BITO, with $35.7 million in net assets.
The ETF opened at $15.03 in October, and hit an ATH of $27.27 on Nov. 10. But with the recent market sell-off, BTF currently hovers around $14, down 17% YTD.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.