Wednesday, May 18, 2022

Is There An Etf For Cryptocurrency

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Cryptocurrency Etfs: What They Are & How They Work

Bitcoin ETF vs. cryptocurrency crackdown: What’s next for the space

A cryptocurrency ETF is an exchange-traded fund that seeks to track the price of one or more digital currencies. Cryptocurrency ETFs do not directly hold cryptocurrency. Instead, they are either backed by physical cryptocurrencies or they may hold derivatives, such as futures contracts, which enable the fund to gain exposure to crypto prices without taking possession of the digital currency.

The first cryptocurrency ETF, ProShares Bitcoin Strategy ETF , became available to investors on October 19, 2021. Prior to that milestone, there were 13 applications awaiting SEC approval for new cryptocurrency ETFs. As of December 2021, the SEC had only approved ETFs that hold bitcoin cryptocurrency futures, as the United States still waits on the sidelines for a physically backed cryptocurrency ETF.

Some ETFs provide indirect or limited exposure to cryptocurrency by holding equity positions in blockchain miners or in businesses that may profit from blockchain technology in some way. These funds are generally referred to as “blockchain ETFs.”

Tip: Some investors may choose to invest in cryptocurrency ETFs to avoid having to directly hold or manage the digital currency themselves. However, investors should keep in mind that crypto ETFs remain speculative investments and still carry significant risk of price fluctuation.

Cryptocurrency Etfs To Buy: Innovation Shares Nextgen Protocol Etf

Innovation Shares NextGen Protocol ETF started trading in 2018 and has holdings in 45 companies. Major holdings include Nvidia, Intel and PayPal, so you get a lot of diversification with this one.

This ETF has an expense ratio of 0.95%. It has a weighted average market cap of $294.67 billion. Innovation Shares NextGen Protocol ETF has an annual dividend yield of 0.39% per share and an AUM of $26.65 million. This ETF has a year-to-date return of 8.61%.

On the date of publication, Faizan Farooque did not have any positions in the securities mentioned in this article.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S& P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.

Article printed from InvestorPlace Media, https://investorplace.com/2021/05/the-5-best-crypto-etfs-on-the-market-blok-blcn-legr-bttc-koin/.

This List Will Contain What We Feel Are The Best In Class Cryptocurrency Etfs

We see plenty of articles highlighting the dozens of cryptocurrency ETFs you can buy here in Canada. The reality of it is, these lists get a bit convoluted. In our opinion, most all of these funds provide the exact same purpose, so why not simply list the one we feel is best in class?

All of these ETFs trade on the Toronto Stock Exchange, and if you do want alternate funds, we’ll list them in point form below.

Also Check: How To Stay Up To Date With Cryptocurrency

How Does A Cryptocurrency Etf Work

Cryptocurrency ETFs provide several benefits to investors, such as significantly lower cryptocurrency ownership costs and outsourcing of the steep learning curve required to trade cryptocurrencies.

There are two kinds of cryptocurrency ETFs:

  • The first type is backed by physical cryptocurrencies. The investment firm managing the fund makes purchases of cryptocurrencies, and ownership of the coins is represented as shares. When purchasing shares in the ETF, investors will indirectly own cryptocurrencies. Thus, owners can gain exposure to cryptocurrencies without the accompanying expense and risk of owning them outright.
  • The second type is a synthetic variant that tracks cryptocurrency derivatives like futures contracts and cryptocurrency exchange traded products . For example, many ETFs proposed to the U.S. Securities and Exchange Commission track prices of bitcoin futures contracts traded at the Chicago Mercantile Exchange .
  • The first cryptocurrency ETF, the ProShares Bitcoin Strategy ETF , started trading in October 2021. This is an ETF that tracks bitcoin futures prices.

    The ETF share price mimics price movements of derivatives, instead of prices of actual cryptocurrencies. Therefore, the price of shares in a given cryptocurrency ETF rises with an increase in futures contract prices. It declines with a corresponding decrease. Just like other derivatives, synthetic cryptocurrency ETFs carry added risk because their operations may not always be transparent.

    How To Invest In Blockchain

    Cryptocurrency ETF Theme With Aerial View Of NY Skyline Stock Photo ...

    Outside of crypto trading and individual stocks, investors can gain exposure to the blockchain through exchange-traded funds .

    A blockchain ETF holds a basket of publicly traded companies exposed to the technology. These companies can either directly use blockchain or profit from their services that support the industry.

    Its important to note that blockchain ETFs dont directly hold cryptocurrency assets. Instead, these funds are designed to invest in global companies, of which many are blue-chip technology names.

    Read Also: How To Buy Bitcoin With Cc

    Reality Shares Nasdaq Nexgen Economy Etf

    Reality Shares Nasdaq NexGen Economy ETF tracks the Reality Shares Nasdaq Blockchain Economy Index and has been around since 2018. Its portfolio comprises 74 companies, including Galaxy Digital Holdings, IBM , and Overstock .

    The portfolio is very diverse, considering that the selection comprises businesses providing multi-service merchant bank supporting digital assets to a provider of integrated circuit microprocessors for supercomputing hardware. None of the owned stakes weigh over 2% either, meaning there are fairly even levels of investment between all the holdings.

    BLCN has an expense ratio of 0.68% and an AUM of $278 million. The dividend yield is very respectable at 0.51%. And at 19.28x price-to-earnings, the ETF is trading at a very attractive price point.

    Delayed Bitcoin Etf Approvals

    Companies have been vying to release the first U.S. bitcoin ETF for nearly a decade. But the Securities and Exchange Commission has been slow to embrace the asset, citing concerns about the lack of regulation and the potential for fraud and manipulation in the bitcoin market.

    “General conservatism has been a pattern among U.S. regulators,” said Johnson, pointing to the landscape littered with bitcoin ETF filings being updated, abandoned applications and others collecting dust.

    Previously, most bitcoin ETF applications have been based on so-called spot markets, or investing in the currency directly, explained Stephen McKeon, associate professor of finance at the University of Oregon in Eugene and partner at Collab+Currency, a cryptocurrency-focused investment fund.

    However, there was a shift in August when SEC chairman Gary Gensler signaled the agency may be more open to a futures-backed bitcoin ETF under the Investment Company Act of 1940, which governs mutual funds and may offer “significant investor protection.”

    I dont think the SEC is in any big hurry to move forward and allow direct investment in bitcoin by ETFs anytime soon.Ben JohnsonDirector of global ETF research for Morningstar

    The change prompted a flood of filings ahead of this week’s approvals.

    While the SEC is expected to approve a handful of other bitcoin futures ETFs, it’s unclear if and when the agency may greenlight an ETF investing in the currency itself.

    Recommended Reading: How To Invest On Cryptocurrency

    Valkyrie Bitcoin Strategy Etf

    The Valkyrie Bitcoin Strategy ETF is also a Bitcoin futures ETF that was launched a few days after BITO was approved by the SEC. BTF trades on the NASDAQ stock exchange and, similar to BITO, doesnt invest directly in Bitcoin. Rather, BTF holds front-month Chicago Mercantile Exchange Bitcoin futures. BTF has nearly $60 million in assets under management with a 0.95% expense ratio. This ETF is set to become even more popular amongst investors as Valkyrie plans to launch more crypto-focused funds over the coming months and years.

    Grayscale Bitcoin Investment Trust

    What ETFs to look at for exposure to the cryptocurrency space

    An early mover in the cryptocurrency space, GBTC is an index fund that gives investors exposure to changes in the price of bitcoin without buying the digital currency themselves. Launched in 2013, GBTC holds bitcoin directly, enabling investors to gain exposure to price movements in the digital currency without opening a digital wallet to store bitcoin. GBTC has an expense ratio of 2%, higher than is typically the case with ETFs.

    An important point to note is that Grayscale Investment hired David Lavelle to spearhead the attempt to convert GBTC into an ETF. This will follow with a Bank of New York Mellon partnership for ETF services.

    Assets under management: $42.0 billion

    Expense ratio: 2.0%

    Read Also: Where Does Crypto Money Go

    What Are Crypto Etfs

    So far, there are three broad types of crypto ETFs in Canada Bitcoin, Ethereum, and Bitcoin+Ether ETFs.

    These Exchange Traded Funds invest directly in the actual crypto and hold them in cold storage.

    Essentially, when you purchase a crypto ETF, you are buying the digital asset and the value of your holdings will vary based on the performance of the underlying cryptocurrency.

    Crypto ETFs are not the same as blockchain ETFs which are ETFs with holdings in companies that develop or use blockchain technologies.

    Like other ETFs, you can purchase a crypto ETF using a brokerage account.

    Btcx Ci Galaxy Bitcoin Etf

    BTCX was the third Bitcoin ETF to launch in Canada on the Toronto Stock Exchange, offering exposure to bitcoin held in cold storage just like its two predecessors. BTCX knows its at a disadvantage being late to the game though, so it has made its fee a category-low 0.40%.

    Short-term traders may still prefer the greater liquidity of BTCC and EBIT, but a long-term holder can save significantly on fees by using BTCX. BCTX.U trades in U.S. dollars.

    All three of these ETFs track the Bloomberg Galaxy Bitcoin Index , which measures the performance of a single bitcoin traded in U.S. dollars.

    You May Like: How To Buy Bitcoin In Russia

    How Do Crypto Etfs Work

    An ETF is essentially a fund that sells shares to investors. Shares of these funds trade like stocks and can be bought or sold through a brokerage account when the market is open. A crypto ETF provides a way of owning crypto currency through your brokerage account. The main benefit being crypto ETFs held in a tax deferred account enjoys the same tax treatment on gains as any other stock or mutual fund.

    Note that not all crypto ETFs are true ETFs and may be structured as a closed end fund, a grantor trust, or other instrument that trades over the counter . Well refer to them here as ETFs even though under the hood they may work a little differently – read the prospectus so you know what you are buying!

    A crypto ETF tracks a digital currencys market value . Some track a single crypto currency . Others track a basket / blend of several cryptocurrencies. These funds allow you to invest in cryptocurrency without personally holding it. They work similar to gold and silver ETFs where you can own precious metals on paper, but they are actually held in a vault by the ETFs management company. EFTs are NOT the same thing as direct ownership, but the returns should be similar . It is up to you to understand the way the fund operates by always reading the prospectus BEFORE buying. Analogous to precious metal ETFs, a crypto currency ETF helps to eliminate security and storage complexities that come up with regular cryptocurrency investing.

    Alternatives To Cryptocurrency Etfs

    What Is Cryptocurrency ETF?

    While there are no cryptocurrency ETFs trading in U.S. markets other than the above-mentioned ProShares Bitcoin Strategy ETF, investors can put their money into a number of other ETF-like products for crypto exposure. The closest product to a cryptocurrency ETF product is the Bitcoin Investment Trust . The trust is a closed-end fund that resembles an ETFit owns bitcoins on behalf of investors, and its shares trade in over-the-counter markets.

    But Grayscales Bitcoin Investment Trust is not an ETF. It is open only to investment firms, accredited investors, or high-net-worth individuals and is not accessible to a mainstream audience. GBTC has a high minimum investment amount, and each purchase of its shares is accompanied by a lock-up period for investors.

    As in the case of ETFs, the funds sponsor, Grayscale Investment Trust, charges an annual fee. But the feeequal to 2% of the funds assetsis significantly higher than that for most ETFs. GBTC share prices are also prone to volatile swings, much like its underlying security. The shares also trade at a significant difference from bitcoins actual price. For example, during the 2017 run-up in bitcoin prices, investors were paying a premium of 100% over actual bitcoin prices to own GBTC shares.

    Recommended Reading: Which Crypto To Invest Now

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    Cryptos: Proshares Bitcoin Strategy Etf

    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.

    Don’t Miss: Can You Day Trade Bitcoin On Robinhood

    How To Invest In Crypto Without Buying Coins

    The easiest way to get investment exposure to crypto without buying crypto itself is to purchase stock in a company with a financial stake in the future of cryptocurrency or blockchain technology.

    But investing in individual stocks can bear similar risks as investing in cryptocurrency. Rather than choosing and investing in individual stocks, experts recommend investors put their money in diversified index funds or ETFs instead, with their proven record of long-term growth in value.

    Believe it or not, most individuals with a retirement plan or an investment portfolio allocated in an index fund already have some exposure to crypto, says Daniel Johnson, a CFP with ReFocus Financial Planning.

    Many of the best index funds like S& P 500 or total market funds include publicly traded companies that have some involvement with the industry by either mining crypto, being involved in the development of blockchain technology, or holding significant amounts of crypto on their balance sheets, says Johnson.

    For example, Tesla which holds over a billion dollars in Bitcoin and accepted Bitcoin payments in the past is included in any funds that track the S& P 500. Since its 2020 inclusion, its become one of the most valuable, and therefore influential companies in the index. And Coinbase, the only publicly traded cryptocurrency exchange, is in the ARK Fintech Innovation ETF.

    Etfs Trading In Cryptocurrency Offer A Safer Bet Than Crypto Itself

    What bitcoin futures ETF launches mean for the future of crypto

    Price movements of cryptocurrencies such as Ethereum and Litecoin can be hard to predict. The rapid fluctuations in the price of cryptocurrencies may not fit the trading style of low-risk profile traders. Crypto ETFs are comparatively less risky to invest in and may provide better returns in the long-term.

    While you probably won’t find the astronomical returns found in cryptos like Shiba Inu and Dogecoin, you’re still exposed to a high growth industry. Since these ETFs are vetted by regulators and managed by institutions, you’ll be able to gain exposure to cryptocurrency without needing to take on extreme amounts of risk.

    Read Also: Where Do People Buy Bitcoin

    Why Invest In Blockchain Etfs

    Its a buzzy, exciting technology, but blockchain is only in the early stages of development. Cryptocurrencies have been making dramatic headlines for their outsized gains and tremendous losses, but more pragmatic blockchain applications have had a much lower profile.

    Large, established public companies have dabbled in blockchain businesses while smaller, more focused firms have put blockchain and crypto at the core of their operations. In either case, there has yet to be a killer app that has made the case for blockchain as a core part of the future of business and technology.

    This means investing in the stocks of just one or a few blockchain or crypto-focused companies is very risky. That makes choosing a diversified blockchain ETF a less risky way to get exposure to the industry. The blockchain ETFs on our list invest in dozens or even hundreds of stocks, providing plenty of diversification in a single fund.

    Given how rapidly the blockchain space is evolving, choosing a blockchain ETF for your portfolio could be the best possible choice for investing in the industry.

    The author held no positions in the securities discussed in the post at the original time of publication.

    Introduction To Bitcoin And Cryptocurrencies

    Bitcoin and cryptocurrencies have gained traction in recent years. What started with Bitcoin has grown to become a $3 trillion industry, with thousands of cryptocurrencies now available to investors all over the world.

    Cryptocurrencies have become investment assets available to both retail and institutional investors. The entry of institutional investors into the cryptocurrency space has created the need to launch crypto-focused funds, allowing them to gain direct and indirect exposure to BTC and other cryptocurrencies.

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