9 Bitcoin ETFs and Cryptocurrency Funds You Should Know
After a volatile 2022, Bitcoin and other digital currencies are stabilizing. Here are nine Bitcoin ETFs and crypto funds to gain exposure to the space.
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The rapid rise and fall of cryptocurrency prices over the past two years has hurt asset gathering for Bitcoin ETFs, as well as cryptocurrency and blockchain-related funds.
Cryptocurrencies have been surprisingly calm so far in 2023, eschewing much of the volatility they've become known for in the past. That's excellent news if you're a longtime investor.
The latest hurdle for the cryptocurrency industry to overcome in the U.S. was the collapse of Signature Bank, along with the winding down of Silvergate Capital, a lender to the crypto industry.
With the exit of three crypto-friendly financial institutions, it's going to take time for the industry to replace those businesses.
"These were the two most bitcoin-friendly banks, supporting the lion's share of fiat settlement for bitcoin trades between trading counterparties in the U.S.," Mike Brock wrote in a blog post, as reported by CNBC (opens in new tab). Brock is the CEO of TBD at Block (SQ (opens in new tab)), a unit which focuses on cryptocurrency and decentralized finance.
However, as with any dislocated industry, other North American financial institutions will step in to fill the void left by their departure.
"Near-term, crypto banking in North America is a tough place," said crypto industry executive Mike Bucella. "However there is a long tail of challenger banks that may take up that slack."
The ProShares Bitcoin Strategy ETF's (BITO (opens in new tab)) October 2021 launch kicked off a flurry of new crypto funds coming to market. While that has slowed in North America, Global X just launched three new exchange-traded products (opens in new tab) in Europe that are available for sale in seven different countries including Germany and Sweden. They are the first launches in 2023, suggesting last year's slowdown is over.
Here are nine bitcoin ETFs and other cryptocurrency funds available to investors today. This includes the Bitcoin futures ETFs, but the majority of these products either deal in equities that are somehow involved with cryptocurrencies, or in other types of exposure that have their own twists and turns.
Data is as of March 27, unless otherwise indicated.
Grayscale Bitcoin Trust
- Assets under management: $17.0 billion
- Expense ratio: 2.00%
The Grayscale Bitcoin Trust (GBTC (opens in new tab), $15.23) is not an ETF, nor is it a mutual fund for that matter. Instead, it is what's described as a closed-end grantor trust (opens in new tab). This means that it issues a fixed number of shares when it goes public, and then those shares are traded "over-the-counter" (OTC).
GBTC shares are intended to follow the price of Bitcoin based on the CoinDesk Bitcoin Price Index. At the moment, each share of the Grayscale Bitcoin Trust represents 0.00090857 bitcoins, but that number isn't fixed. That's because, unlike an ETF, closed-end trusts such as GBTC can trade at a discount or premium to their underlying assets.
That has been the case with GBTC ever since its launch (as the Bitcoin Investment Trust) in 2013. Today, the Grayscale Bitcoin Trust trades at a 37% discount to the NAV of the bitcoins held by the Trust, meaning you're effectively buying bitcoins for 63 cents on the dollar.
Grayscale would like to see this discount go away. In October 2021, it filed plans with the Securities and Exchange Commission (SEC) to convert the trust to an ETF. In June 2022, the SEC said no to the trust's plans on the grounds it was concerned about Bitcoin market manipulation.
As a result, Grayscale sued the SEC in the U.S. Court of Appeals, arguing that it wasn't being treated equally by the securities regulator given it already permits futures-backed Bitcoin ETFs.
On March 7, the two parties began oral arguments for the case. Grayscale CEO Michael Sonnenshein expects a ruling by the third quarter. Already up nearly 84% year-to-date, a positive ruling could see GBTC double by June, unlocking the current $7.2 billion discount.
Learn more about GBTC at the Grayscale provider site. (opens in new tab)
ProShares Bitcoin Strategy ETF
- Assets under management: $911.9 million
- Expense ratio: 0.95%
The ProShares Bitcoin Strategy ETF (BITO (opens in new tab), $16.60) was launched on Oct. 19, 2021. It became the first U.S. ETF to provide investors with exposure to Bitcoin futures.
The most important thing to note right off the bat is that BITO does not invest directly in Bitcoin, which provides as close to one-to-one exposure as you could want.
Instead, it invests in cash-settled, front-month Bitcoin futures – contracts with the shortest time to maturity. It also can invest in back-month Bitcoin futures, which have longer times to maturity.
The futures contracts that BITO invests in are regulated by the Commodity Futures Trading Commission. These contracts are only traded on the Chicago Mercantile Exchange and are subject to the rules of the CME.
The ETF can also invest in U.S. Treasury Bills and Repurchase Agreements as short-term investment vehicles for cash positions, and it can also use leverage.
The biggest concern when BITO launched was that the ETF would underperform the spot Bitcoin price because of the roll costs. These are the costs incurred by continually rolling over the futures contracts as they expire.
"[T]hose roll costs have fallen more than 80% since BITO's launch in October 2021," ProShares wrote in its one-year update (opens in new tab) for the ETF. "Keep in mind, roll costs don't need to be zero for BITO to closely track spot bitcoin. BITO earns interest on its cash balances that helped to offset the roll costs."
While Bitcoin prices haven't cooperated since the launch – BITO is down 52% since inception through Jan. 31 -- they have rebounded in 2023, up 40% year-to-date.
BITO managed to gather more than $1 billion in assets in two days at its launch. Assets have been pared back considerably since. However, it remains the world's largest Bitcoin ETF.
Learn more about BITO at the ProShares provider site. (opens in new tab)
Bitwise 10 Crypto Index Fund
- Assets under management: $476.0 million
- Expense ratio: 2.50%
The Bitwise 10 Crypto Index Fund (BITW (opens in new tab), $10.35), launched in November 2017, tracks the performance of the Bitwise 10 Large Cap Crypto Index, representing the 10 largest investable cryptocurrencies. These 10 cryptocurrencies account for 70% of the total crypto market.
Because BITW is weighted by market capitalization, Bitcoin accounts for 67% of the portfolio. That's more than double Ethereum, at 26%. Cardano is a distant third at 2%.
BITW only became available over-the-counter in December 2020. It began trading with $120 million in assets. Twenty-seven months later, despite the downturn in cryptocurrencies, it has managed to hang on to some of its assets under management.
Bitwise Asset Management, the fund's sponsor and advisor, explained how BITW works relative to an open-ended mutual fund or ETF.
"The Bitwise 10 Crypto Index Fund is an open-ended, publicly traded statutory trust, not an exchange-traded fund or closed-end fund," Bitwise Asset Management stated in December 2020 (opens in new tab). "Accredited investors may create shares of the Fund at net asset value (NAV) through private placement. Those restricted shares may then become eligible for public sale after a 12-month holding period."
The Bitwise 10 Crypto Index Fund is rebalanced monthly. The Bitcoin ETF currently trades at a steep 57% discount to NAV.
Learn more about BITW at the Bitwise provider site. (opens in new tab)
Amplify Transformational Data Sharing ETF
- Assets under management: $417.7 million
- Expense ratio: 0.75%
The Amplify Transformational Data Sharing ETF (BLOK (opens in new tab), $17.97) is similar to many U.S. cryptocurrency ETFs in that it is an actively managed fund that aims to invest at least 80% of its assets in companies that are involved in developing blockchain technologies and/or using them for their own business.
The ETF has 45 holdings at present, the top 10 of which account for about 43% of assets.
MicroStrategy (MSTR (opens in new tab)), the data analytics software company that's become more known for its Bitcoin investments than its existing business, is one of the top 10 holdings with a weighting of 5.2%. Microstrategy held 132,500 Bitcoins as of Dec. 30, 2022. Those Bitcoins are valued at $3.4 billion, about $500 million less than what it paid for them.
Other top 10 holdings include Bitcoin miner Riot Platforms (RIOT (opens in new tab)), Coinbase Global (COIN (opens in new tab)), one of the world's leading cryptocurrency exchanges, and Block, which provides Bitcoin trading through CashApp.
However, a few interesting holdings are found outside of the top 10. Specifically, BLOK invests in the Purpose Bitcoin ETF (two listings, one in Canadian dollars, and one in U.S. dollars), as well as the 3iQ CoinShares Bitcoin ETF – all of which are Canadian Bitcoin ETFs that directly track the digital asset.
Breaking down the blockchain industry allocation, BLOK's top three are transactional firms (27%), private blockchain (14%) and application software (13%).
BLOK is also diversified across size: 40% of assets are large caps or ETFs, 28% are mid-cap stocks, and 32% are small-cap or unclassified. That makes for an average market cap of $5.8 billion.
Learn more about BLOK at the Amplify provider site. (opens in new tab)
First Trust Indxx Innovative Transaction & Process ETF
- Assets under management: $113.3 million
- Expense ratio: 0.65%
The First Trust Indxx Innovative Transaction & Process ETF (LEGR (opens in new tab), $36.24) is another equity-based cryptocurrency ETF. Launched by First Trust in 2018 – the fifth-largest ETF provider in the U.S. by revenue and third-largest by the number of ETFs – it tracks the performance of the Indxx Blockchain Index, an index that follows companies that have some connection to blockchain technologies.
LEGR's index takes all available blockchain companies and ensures that each holding meets specific size, liquidity and trading minimums. It then applies a score of 1 for companies actively developing blockchain technology, 2 for companies actively using blockchain technology, and 3 for companies actively exploring blockchain technology.
The index then only includes companies scoring 1 or 2, giving 50% of the weighting to firms scoring 1, and 50% to those scoring 2. Companies scoring 3 are excluded altogether. The portfolio is capped at 100 stocks, and the index is rebalanced and reconstituted twice a year.
The ETF's top three sectors currently are financials (37%), technology (30%), and communication services (10%). The top three countries are the U.S. (38%), China (12%), and Germany (8%).
This also is a large-cap-heavy fund, with a median market cap of $82.5 billion. It also tends to track the performance of the S&P 500. In three out of the four previous years, LEGR's annual total return was very similar to the index, providing investors with a safer alternative to more directly-related cryptocurrency funds.
Learn more about LEGR at the First Trust provider site. (opens in new tab)
Siren Nasdaq NexGen Economy ETF
- Assets under management: $76.1 million
- Expense ratio: 0.68%
The Siren Nasdaq NexGen Economy ETF (BLCN (opens in new tab), $20.46) is a passively managed (read: index) ETF that tracks the performance of the Nasdaq Blockchain Economy Index, which is made up of stocks that support blockchain technology or utilize it for their own businesses.
BLCN, which launched in January 2018, has 61 holdings. The index starts with all companies with a market cap larger than $200 million that exhibit "blockchain company" characteristics. It then assigns them a "blockchain score" – the index's proprietary screening methodology that measures each company based on their ability to benefit from blockchain technologies.
The Bitcoin ETF is reasonably diversified. The top 10 holdings account for just 26% of its overall assets, and unlike many other crypto-based funds, this one has a lot of blue chip stocks in its ranks. Top holdings include Nvidia (NVDA (opens in new tab)), PayPal Holdings (PYPL (opens in new tab)) and Microsoft (MSFT (opens in new tab)).
The top three sectors are technology (42%), financials (34%) and communications (13%). And BLCN is very much a "global" fund, meaning it includes plenty of international stocks. While the U.S. accounts for 54% of assets, the rest come from other nations including Japan (15%) and China (12%). The weighted average market cap is $136.2 billion.
Learn more about BLCN at the Siren provider site. (opens in new tab)
Global X Blockchain ETF
- Assets under management: $55.6 million
- Expense ratio: 0.50%
The Global X Blockchain ETF (BKCH (opens in new tab), $19.69) looks to invest in companies that benefit from the global blockchain market, which was $10 billion in 2022, but could surpass $1.4 trillion by 2030.
BKCH tracks the performance of the Solactive Blockchain Index, a collection of stocks that have operations that utilize or benefit from digital assets and blockchain technologies. It divides the companies into three groups: 1.) "pure-play" stocks that derive at least 50% of revenues from blockchain activities; 2.) "pre-revenue" firms whose primary business is in blockchain technology but don't yet generate revenue; and 3.) "diversified" companies that generate less than 50% of revenues from blockchain activities.
The index is weighted by free float market cap, but it also has a few rules it enforces at each rebalancing. No component can account for more than 12% of the portfolio and no less than 0.3%. All stocks with a weighting of greater than 4.5% can't collectively account for more than 45% of the portfolio, with the remainder capped at 4.5%. And pre-revenue firms and diversified companies can't make up more than 10% of the index weight collectively, and individually can't be weighted any more than 2%.
Technology is Bitcoin ETF's largest sector by far, at 72% of assets, followed by financials (22%) and industrials (3%). The U.S., Canada and China account for almost 94% of the portfolio. There are three holdings with double-digit weights: Block at 17.4%, Coinbase Global (12.6%), and Riot Blockchain (10.6%). Block and Coinbase Global will be trimmed to 12% at the next rebalancing.
Learn more about BKCH at the Global X provider site. (opens in new tab)
Bitwise Crypto Industry Innovators ETF
- Assets under management: $53.4 million
- Expense ratio: 0.85%
The Bitwise Crypto Industry Innovators ETF (BITQ (opens in new tab), $5.15) is another equity-focused Bitcoin ETF from Bitwise Investments, the world's largest crypto index fund manager. This index fund tracks the performance of the Bitwise Crypto Innovators 30 Index.
To make it into the index, a company must generate at least 75% of revenues from the cryptocurrency ecosystem, or have 75% of their net holdings in Bitcoin or some other liquid crypto asset. These are considered "crypto innovators" and account for 85% of the index holdings. The remaining 15% of the fund is made up of non-Innovators that are at least $10 billion in market cap and either have a dedicated business initiative focused on the crypto ecosystem, or hold at least $100 million in Bitcoin, Ethereum or another liquid crypto asset.
BITQ, which launched on May 21, 2021, has 26 holdings, with the top 10 accounting for 60% of the fund's net assets. The holdings are much more closely related to cryptocurrencies than some of the other bitcoin ETFs mentioned here.
The top three categories by weight include mining (34%), trading and custody (30%), and asset management (12%). Most of the companies held are mid caps or smaller, with micro caps accounting for 32%, small-cap stocks (31%), mid caps (19%), and large caps (18%).
The argument for buying this new ETF is three-fold: It gives you exposure to the crypto market without owning crypto assets directly; it gives you exposure to the companies building crypto infrastructure such as Bitcoin miners, trading platforms, etc.; and lastly, it gives you a piece of global cryptocurrency players such as Coinbase, the top holding at 9.6%.
Through March 1, according to ETF.com, BITQ is the fourth-best performing ETF (opens in new tab) of 2023, up 56.3%.
Learn more about BITQ at the Bitwise provider site. (opens in new tab)
VanEck Bitcoin Strategy ETF
- Assets under management: $39.2 million
- Expense ratio: 0.65%
The VanEck Bitcoin Strategy ETF (XBTF (opens in new tab), $27.04) launched its first U.S.-listed Bitcoin-linked ETF on Nov. 15, 2021. It entered the field as the low-cost leader among Bitcoin futures ETFs, at 0.65% in expenses. It remains cost-competitive more than two years later.
Greg Krenzer, VanEck's head of Active Trading, is the ETF's portfolio manager, and boasts more than two decades of trading experience, which includes futures. He's been with VanEck since 1994. That's good, because XBTF invests in Bitcoin futures listed on the CME.
In February, VanEck's head of Digital Assets Research, Matthew Sigel, discussed in a blog post (opens in new tab) why Bitcoin is rallying. As mentioned earlier, the world's most valuable cryptocurrency is up 51% YTD.
Sigel made nine arguments for the rally. The most compelling technical argument is that Bitcoin has never fallen for two consecutive years. Unless there's a complete reversal over the next few months, this record looks ready to stay intact.
Here's one of Sigel's macro bull arguments:
"Central banks bought record amounts of gold in 2022. Countries on the fringes of the financial system continue to see both economic and negotiating value in adopting private, censorship resistant bearer assets. We expect a 'big bang' at some point, such as Saudi Arabia officially buying Bitcoin for its state reserves."
On March 14, Bitcoin traded at $26,500 for the first time since June 2022. This is an indication investors are moving into riskier assets as it becomes more likely the Silicon Valley Bank collapse could have the Federal Reserve ending its aggressive campaign to hike interest rates sooner rather than later.
Learn more about XBTF at the Vanguard provider site. (opens in new tab)
Will has written professionally for investment and finance publications in both the U.S. and Canada since 2004. A native of Toronto, Canada, his sole objective is to help people become better and more informed investors. Fascinated by how companies make money, he's a keen student of business history. Married and now living in Halifax, Nova Scotia, he's also got an interest in equity and debt crowdfunding.
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