10 Best Crypto ETFs To Invest In (2022 Edition)
Cryptocurrency ETFs (exchange-traded funds) are a great option for investors who wish to gain exposure to cryptocurrency-related and blockchain-related assets, while taking a more hands-off approach to managing their investments. These financial products come in a great variety – from funds based exclusively on Bitcoin to very complex structures that combine blockchain companies’ stocks, Bitcoin futures contracts and other ETFs.
Cryptocurrency ETFs are actively moving from the fringes of financial markets to the main stage. Prominent stock exchanges, such as the NASDAQ and Chicago Mercantile Exchange (CME), and leading fund product providers such as Fidelity and VanEck have joined the crypto ETF game.
What Is a Crypto ETF?
An ETF is a financial product that tracks some other underlying asset (or basket of assets) and is traded on an authorized stock exchange, similar to company stocks. The authorized stock exchanges process ETF transactions during the trading day.
ETFs are quite similar to mutual funds, with both fund varieties based on investing pooled money. However, while mutual funds are traded at the end of a trading day, ETFs are freely traded throughout the day and are subject to most of the rules applicable to stocks.
The term “cryptocurrency ETF” covers a variety of ETF products with exposure to cryptocurrencies, blockchain technology stocks, digital assets, cryptocurrency futures contracts, and even other ETFs.
The most basic of these products is a Bitcoin ETF, which tracks the price of Bitcoin. Others may be based on a basket of different cryptocurrencies. Still other cryptocurrency ETF varieties are based on stocks of blockchain companies.
The most complex cryptocurrency ETFs might be made up of a combination of other crypto ETFs, stocks, cryptocurrencies, crypto futures and more.
Why Invest in Crypto ETFs?
Cryptocurrency ETFs offer great portfolio diversification potential. Many of these ETFs are based on a basket of assets, helping you reduce your reliance on a single one. Some of them also track other ETFs, providing a further degree of diversification.
Cryptocurrency ETFs’ diversification potential is particularly useful for many small-scale retail investors. A lot of these investors have an overreliance on traditional stocks and bonds in their portfolio, lacking sufficient exposure to emerging, high-potential areas like crypto. By owning cryptocurrency ETFs, these investors can reap the benefits of portfolio diversification.
Hands-Off Approach to Investing
Similar to index funds, ETFs are closely tied to their underlying assets and represent a form of passive investment. They’re managed at investment firms by professional portfolio managers. Investors can thus benefit from participation in the market while taking a hands-off approach to investment management.
While cryptocurrencies are loosely regulated in some countries or completely unregulated in many others, cryptocurrency ETFs are subject to the same stringent rules as stocks and other financial products traded on authorized stock exchanges.
This provides peace of mind for more cautious investors, many of whom would like exposure to crypto assets but avoid purchasing crypto coins due to the unregulated nature of the industry. Cryptocurrency ETFs traded on stock exchanges are a great opportunity for such individuals to hold crypto-related assets — and not lose sleep at night.
Crypto coin ownership carries certain security risks, due to hacker attacks on blockchain platforms. Some of these attacks have resulted in significant asset losses for coin holders. To prevent yourself from such attacks, it’s crucial to invest in a cold crypto wallet rather than use a hot wallet. With crypto ETFs, such security risks are considerably lower, as the ETFs are held in cold wallets.
Naturally, investment funds and stockbrokers aren’t completely immune to cybersecurity threats. However, these entities do not come under the same level of sustained attacks that blockchains endure. The frequency of these attacks is steadily rising, serving as a further reminder of the risks involved in holding crypto.
Furthermore, the stock exchanges where the ETF funds are registered have some of the best security setups in the world. If Warren Buffett isn’t afraid that his money will be stolen from the stock exchange, you have no serious reason to be.
10 Best Crypto ETFs in the Stock Market
Crypto and blockchain ETFs are emerging products in financial markets. While the earliest crypto fund products were launched in 2013, most ETFs based on Bitcoin or other cryptocurrencies have become available only within the last two years. Now there are dozens of these funds available on stock exchanges.
Among this variety, we’ve picked the best ten crypto and blockchain ETF products, based on factors such as management fees, balance of assets in the fund, or popularity among investors.
It should be noted that, due to the crypto market downturn that began in November 2021, virtually all crypto ETFs — similar to cryptocurrencies and other products tied to crypto assets — now feature rather unimpressive yearly and quarterly return figures.
However, in the past month, the crypto market has shown tentative signs of recovery. If this rebound is sustained, we’ll soon see better return figures for cryptocurrencies and products such as crypto ETFs.
Here’s our list of the ten best crypto ETFs on the market.
1. Purpose Bitcoin ETF (BTCC.TO)
What else to start our list with other than the world’s first Bitcoin ETF product – the Purpose Bitcoin ETF? This fund was launched on Canada’s Toronto Stock Exchange (TSX) in February 2021, at a time when south of the border, in the U.S., the Securities and Exchange Commission (SEC) was stubbornly refusing to approve any crypto-based ETF product.
Purpose Bitcoin ETF was launched by Purpose Investments, a Toronto-based asset management firm specializing in ETF and mutual fund products. As of the time of this writing (August 3, 2022), the fund has a total of $752.69 million in assets under management (AUM) and is based on tracking the price of Bitcoin.
The Purpose Bitcoin ETF has a yearly management fee of 1%, a typical amount for an ETF product. Per the ETF’s terms, the management fee may increase up to 1.5% if the fund manager’s expenses in servicing the product increase. However, if the expense ratio is lower than 1.5%, this is passed on to customers in the form of a reduction in the management fee.
The minimum initial investment in the ETF is $5,000. After this, any subsequent investments can be as low as $100. As the world’s first Bitcoin ETF, this product will remain popular among many investors who believe in the potential of crypto ETF products.
2. ProShares Bitcoin Strategy ETF (BITO)
The ProShares Bitcoin Strategy ETF is the first cryptocurrency ETF approved in the U.S. It started trading in late October 2021, and attracted over $1 billion in investments within the first several days on the market. Similar to the Purpose Bitcoin ETF above, this product gained widespread popularity thanks to its “first on the market” status.
This ETF is offered by ProShares, a Maryland-based provider of ETFs and leveraged financial products. The product tracks the price of Bitcoin futures contracts. At the moment, the ProShares Bitcoin Strategy ETF is based on two Bitcoin futures traded by the CME Group, one with a 63% share in the fund and the other with a 37% share. Due to the short-term nature of Bitcoin futures contracts, the allocations dynamically change on a frequent basis.
In theory, some proportion of the Bitcoin Strategy ETF might also be allocated to other assets beyond Bitcoin futures contracts, for instance to U.S. Treasury Bills. The fund is actively maintained by ProShares, with a future possibility of such asset class reallocations.
The fund’s expense ratio is 0.95%, marginally lower than Purpose Bitcoin ETF’s ratio of 1%.
3. Grayscale Bitcoin Trust (GBTC)
Grayscale Bitcoin Trust is a trust fund rather than an ETF. Since the trust is the largest and oldest crypto fund in the industry, we believe it’s well worth including in our coverage of crypto ETFs. Established in 2013, GBTC had up to $37 billion in assets under management at the height of the crypto market in late 2021.
At August 2022, the trust fund’s assets under management have declined to $14.9 billion, still the largest amount among all crypto funds. The Grayscale Bitcoin Trust tracks the price of Bitcoin.
This trust fund is offered by Grayscale Investments, a renowned leader in digital and crypto investment products. Grayscale has long attempted to turn this trust fund into an ETF. However, in June 2022, the SEC rejected the company’s application to convert it to an ETF format. Grayscale pledged to continue its efforts in this direction.
As of now, since GBTC isn’t classified as an ETF, it’s not traded on stock exchanges. Instead, shares in the trust are quoted on OTCQX, a U.S. company that provides trading services to companies not listed on a stock exchange.
GBTC’s management fee is 2%, considerably higher than what the majority of ETFs charge. However, it should be taken into account that this fund is a trust, and such management fees are not usual for cryptocurrency funds of this type.
4. CI Galaxy Ethereum ETF (ETHX-B.TO)
The first three funds in our list are popular, high-profile products. However, some of the smaller funds might offer benefits such as better diversification or lower fees. The funds above, for instance, are all based on tracking Bitcoin, whether directly or via Bitcoin futures, as is the case with the ProShares ETF. But what if you’d like exposure to other leading crypto assets as well?
Canada’s largest investment firm, CI Financial, offers a crypto ETF based on tracking the price of the Ether cryptocurrency. The CI Galaxy Ethereum ETF features among the world’s lowest management fees at 0.4%. It also has no minimum investment requirement.
The fund was launched in April 2021 and trades on the Toronoto Stock Exchange (TSX). The CI Galaxy Ethereum ETF is a good choice for investors who don’t want to be limited to Bitcoin assets only, and are looking for a low-cost entry into the crypto ETF space.
5. CI Galaxy Multi-Crypto ETF (CMCX-B.TO)
This is another ETF product from CI Financial. Unlike the firm’s Ethereum ETF above, the CI Galaxy Multi-Crypto ETF offers exposure to both Bitcoin and Ethereum. Its Multi-Crypto ETF is ideal for investors who prefer to have a balanced investment strategy based on the world’s top two cryptos.
In addition to Bitcoin and Ethereum, a portion of the total funds are allocated to cash equivalent investments. This strategy should reduce the overall volatility of your investment. The allocations to cash equivalents are a great feature of this fund, particularly taking into account crypto’s inherently volatile nature.
As of now, a hefty 88% of the total AUM is directed toward cash equivalent investments. Such a high share diverted away from Bitcoin and Ethereum could be due to the currently under-performing crypto market. As the performance of Bitcoin and Ethereum improves, a higher share of the fund is likely to flow back to its crypto allocations.
The fund debuted on the market last February and has a management fee of 0.5%, which is among the lowest for a multi-crypto fund product.
6. Global X Blockchain and Bitcoin Strategy ETF (BITS)
The Global X Blockchain and Bitcoin Strategy ETF provides a mix of exposure to Bitcoin futures and stocks of blockchain and crypto industry companies. This fund is offered by Global X, a New York fund manager specifically focused on ETF products.
It started trading on the NASDAQ in November last year and features a very affordable management fee of 0.65%. Currently, the fund has over $7 million in AUM.
The ETF is based approximately 51% on a Bitcoin futures contract traded on the CME. The rest is allocated to Global X’s other ETF product, the Blockchain ETF (BKCH), with a small percentage on treasury bills and cash. The Blockchain ETF is a fund that invests in stocks of digital, blockchain and crypto companies. Among its top holdings are cryptocurrency mining companies Marathon Digital and Riot Blockchain, and the Coinbase crypto exchange.
This is one example of an ETF that has an allocation to another ETF product, quite common for crypto ETFs — or ETFs in general, for that matter. It’s a great option for investors who would like to have balanced exposure to Bitcoin and blockchain-based stocks. Although many blockchain and digital industry companies are affected by Bitcoin’s price fluctuations, their share prices may often be less volatile than the actual price of Bitcoin, the world’s top cryptocurrency.
Additionally, these stocks — depending on the nature of their business — may outperform Bitcoin or Bitcoin futures during crypto market slumps.
7. Evolve Cryptocurrencies ETF (ETC.TO)
Evolve Cryptocurrencies ETF is another ETF product with a balance of Bitcoin and Ethereum holdings. It was launched in September 2021 by Evolve ETFs, another specialist provider of ETF products. It’s based 68.7% on the company’s Bitcoin futures ETF and 31.29% on its Ethereum futures ETF.
The fund has over $19 million in AUM. Evolve’s website indicates that the management fee is 0%. However, the actual fee payable by customers is 0.75%, which is linked to the expense ratios of the two ETFs that make up this product. Being under 1%, the fee is still among the most competitive in the industry.
8. 21Shares Binance BNB ETP (ABNB.SW)
The Binance BNB ETP (exchange-traded product) from 21Shares is a great fund if you’d like to diversify your investment beyond Bitcoin and Ethereum. Although the fund is assigned the more generalized label of an ETP, it’s essentially an ETF product based on tracking the price of BNB coin, the fifth largest cryptocurrency by market cap as of August 2022.
The fund was launched in October 2019 by 21Shares AG, a Swiss-based investment firm specializing in cryptocurrency fund products. The BNB ETP is available for trade on several European stock exchanges in Germany, Holland, France and Switzerland.
The fund currently has over $314.42 million in assets under management. Its management fee is 2.5%, on the high end among the funds on our list. Although a low management fee was an important factor for qualification to our ETF list, we included this product due to its focus on the BNB coin, a cryptocurrency that has posted a significantly better yearly performance than both Bitcoin and Ethereum. While Bitcoin and Ethereum have dropped by 46% and 39%, respectively, from a year ago, the BNB coin has experienced a much milder 23% drop.
In the world of crypto ETFs, many products are focused on the world’s two largest crypto coins. Products like the 21Shares BNB ETP are a great way to access other, potentially better performing high-cap cryptos.
9. Fidelity Crypto Industry and Digital Payments ETF (FDIG)
Fidelity Investments is one of the largest asset managers on the planet. Its crypto-related products are bound to be of high interest to many investors. Fidelity does not specialize in ETFs based on crypto coins or Bitcoin futures.
However, the company manages an ETF product, the Crypto Industry and Digital Payments ETF, which is mostly based on stocks of companies from the crypto, digital and blockchain technology domains.
At least 80% of the fund is designed to be allocated to stocks. The current industry allocations of the fund are shown below.
The management fee for the Fidelity ETF is just 0.39%, among the most competitive on the market.
This is a new fund, launched in April 2022. The product is a great option for investors who would like to gain exposure to the crypto industry, but prefer corporate stock-based funds, rather than coin-based funds.
10. VanEck Crypto and Blockchain Innovators UCITS ETF (DAPP)
This ETF, similar to the Fidelity product above, is an offering from a leading investment management company with a focus on crypto and blockchain technology stocks. VanEck Associates, a global investment giant, launched its Crypto and Blockchain Innovators UCITS ETF in April 2021. The fund is available on the London Stock Exchange (LSE) and stock exchanges in three continental European countries: Germany, Switzerland and Italy.
This fund invests in crypto and blockchain technology stocks, with the current top allocations going to the Coinbase crypto exchange; MicroStrategy, a business intelligence products provider; and Marathon Digital Holdings, digital asset technology company which engages in mining cryptocurrencies.
The fund has around $14 million in AUM and offers a low management fee of 0.65%. The VanEck ETF is another great option if you’d like to access a crypto ETF product that’s not tied to tracking coins and focuses instead on blockchain technology companies.
Investing in a Crypto ETF vs. Investing in Crypto Directly
Crypto ETFs provide an attractive alternative to direct investment in crypto coins. You can take advantage of the secure, regulated nature of stock exchange markets. The ability to access multiple coins, futures contracts and crypto stocks all in one product is another great reason to invest in crypto ETFs. Instead of buying and holding separate cryptocurrencies, individual Bitcoin ETFs and stocks in blockchain technology companies, you can simply access them through a single ETF product.
Additionally, when you invest in crypto and blockchain ETFs, you don’t need to worry about storing your crypto assets. The investment management firm takes care of it. On the other hand, storing cryptocurrency directly on a blockchain platform transfers the risk of custody to you.
Having said that, you can transfer asset custody to centralized crypto exchanges if you hold crypto coins on these platforms. For instance, when you buy cryptocurrency on Bybit, your funds will be kept in safe custody directly in your Bybit wallet.
The Bottom Line
Crypto and blockchain ETFs are an emerging product class that offers numerous benefits. But at the end of the day, keep in mind that they still represent a high-risk investment product. Although cryptocurrencies are risky as well, many crypto ETFs are based on derivative products, such as futures contracts, which introduce an additional layer of risk for the investor.
None of the crypto ETF providers guarantee returns, and your initial investment might decrease as well. While they might carry the potential for great returns, they’re also associated with significant volatility. In fact, these products might be more volatile than the more established cryptocurrencies.https://www.bybit.com/user/assets/purchase/crypto?medium=organic_SEO&source=Learn&channel=org_&campaign=regular&content=en&dtpid=1625476444751&utm_campaign=regular&utm_medium=organic&utm_source=learn&utm_content=en