A Cryptocurrency ETF is a fund consisting of digital currencies. ETFs track the price of one or several digital currencies. Cryptocurrency ETFs’ prices change on a daily basis based on investor sales or purchases. Like common stocks, they can be bought in a similar way and are traded on a daily basis.
What to Know About Investing in Cryptocurrency ETFs
Cryptocurrencies have captured the attention of all kinds of investors — from individuals looking for a home run investment to large institutions launching their own cryptocurrency fund.
Some investors have made huge returns by investing early on in cryptocurrencies. But the industry is still very new. There’s big potential to gain, but the wild volatility that has returned since late 2021 and early 2022 proves there’s also big potential to lose. Bitcoin ETF (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) were both down by double-digit percentages through the first few months of 2022.
That’s why investing in a cryptocurrency ETF (exchange-traded fund) might make sense for long-term investors. Rather than trying to pick winning digital assets yourself, an ETF can yield investment exposure to crypto assets and the connection to blockchain technologies they’re built on.
5 Best Cryptocurrency ETFs to Buy
While cryptocurrency ETFs are still relatively new to the market, there’s enough data to know which funds are performing best. We’ve compiled a list of five crypto exchange-traded funds (ETFs) that had the highest year-to-date returns through February 4, 2020. We also look at key financial metrics, including expenses and holdings, when reviewing investments.
Top Five Crypto ETFs to Buy
1. ProShares Bitcoin Strategy ETF (BITO)
It was the first cryptocurrency-focused exchange traded fund (ETF) approved in the United States. The ProShares Bitcoin strategy ETF (symbol: XBTC) tracks the performance of Bitcoin Futures Contracts. The fund has more than $1.5 billion in assets under management and has been approved by the US Securities and Exchange Commission (SEC) just a few months after its launch. The BITO ETF costs $95 per year for every $10,00 invested, which makes it one of the best bitcoin futures ETFs currently available for investors. As Bitcoin’s adoption increases, BITO’S value would increase as more institutions seek to gain exposure to cryptocurrency.
2. Valkyrie Bitcoin Strategy ETF (BTF)
The BTF Bitcoin Strategy ETF is also a Bitcoin futures exchange-traded fund that was launched a few weeks after BITO was approved. BTF trades on NASDAQ and, similar to BITCOIN TOKYO FOUNDATION (BTOF), doesn’t invest directly in Bitcoin. Instead, CME Group holds front-month Chicago Bitcoin futures contracts. BTF has nearly 60 million dollars in assets under management with an expense ratio of 0.95%. As more crypto-focused funds are launched by Valkyrie, the popularity of this ETF will increase.
3. VanEck Bitcoin Strategy ETF (XBTF)
The VanEck bitcoin strategy ETF gained the SEC‘s approval in October but has been launched on the CBOE. It is the third US Bitcoin futures ETF and is expected to gain popularity due to VanEck’s reputation as one of the most reputable investment firms in the country. XBTF debuted on the NASDAQ today and is trading at around $60 per share. It could surge higher in the coming weeks and months due to increased demand.
4. Purpose Bitcoin ETF (BTCC)
While the United States is yet to approve a Bitcoin exchange traded fund (ETF), its Canadian neighbor has already approved several. BTCC is one the largest Bitcoin ETFs, with more than $1 billion in assets under management. BTCC’s price may continue to rise over the next few years, as more investors seek exchange-traded funds (ETFs) that have direct exposure Bitcoin, especially as the U.S. continues to reject the launch of similar ETFs.
5. Amplify Transformational Data Sharing ETF (BLOK)
BLOK is an ETF that invests roughly 80% of its total assets in blockchain companies. BLOK doesn’t focus on tracking an index but rather on blockchain technology. Some of the blockchain ETFs top holdings include MicroStrategy, Paypal, and Coinbase. This fund has an operating expense ratio of 0.7% per year, a one-year investment performance of 195%, and has over $1B in assets. BLOK’s value may increase from its current $59 per share as the cryptocurrency market continues to expand over the next few months and years.
One of the easiest ways to gain exposure to cryptocurrencies without actually owning any is by purchasing stocks in companies that have a financial interest in the future of blockchain technology.
However, investing in individual stocks can be risky, just like investing in cryptocurrencies. Instead of choosing and investing in individual companies, experts suggest investors put their money into diversified index funds or exchange traded funds (ETFs), which have a proven track record of long-term performance. Investing in cryptocurrency ETFs are a great way for novice investors to gain exposure to cryptocurrency-related products. To learn more, check out What is a Cryptocurrency Exchange Trade Fund?
