ETFs for What's Next in Cryptocurrency

Broadly speaking, it’s been a banner first quarter for cryptocurrencies. Bitcoin, the largest asset in the group, is soaring to start 2023, carrying the total market capitalization of the cryptocurrency universe to $1.18 trillion, as of late March 23.

What has some crypto enthusiasts encouraged by the start to 2023 is that while bitcoin and friends are rebounding from 2022’s “crypto winter,” there’s more to the story. Stress in the banking system, including the collapses of Credit Suisse, Silicon Valley Bank and Silvergate, is prompting some market participants to evaluate crypto as an alternative to the traditional banking system.

“Bitcoin was designed in reaction to Lehman Brothers in the 2008 crisis. It was designed because you can't trust central authorities. And, it's designed because it's clear that central authorities will fail. It's not a question of if. It's more a question of when,” said Ledge CEO Pascal Gauthier in a recent interview with CoinTelegraph.

A takeaway from the above could be that the current environment is increasingly hospitable to crypto exchange traded funds. Here are a few to consider.

Global X Blockchain ETF (BKCH)

The Global X Blockchain ETF is more than a cryptocurrency ETF because blockchain technology has myriad applications beyond the realm of digital assets. That said, BKCH is a relevant play on rebounding crypto prices because a fair amount of its 24 holdings are bitcoin miners – the equities arguably most correlated to the digital currency’s price action.

Amid the aforementioned crypto winter of 2022, some bitcoin miners, including BKCH holdings, were pushed to the brink. Some had to liquidate holdings of the digital currency just to stay afloat. They’re not of the woods yet, but the industry is rebounding. Plus, more investors are waking up to the industry’s clean energy story, which could be a long-term catalyst.

“Miners are incentivized to operate in locations with the cheapest and most accessible energy available. Expanding operations in places suitable for solar and wind farms is a compelling option. While these energy sources currently have reliability limitations, solar and wind energy have become more affordable than fossil fuel sources,” according to Global X research.

VanEck Bitcoin Strategy ETF (XBTF)

The VanEck Bitcoin Strategy ETF was one of the original futures-based bitcoin ETFs to list in the U.S. remains relevant today because the Securities and Exchange Commission (SEC) refuses to approve a spot bitcoin ETF.

Futures-based ETFs – regardless of underlying asset class – aren’t perfect. The monthly rolling of contracts leads to high fees and the possibility of returns that, over time, lag the asset’s spot price. Still, for nimble investors, there’s a lot of potential with XBTF, particularly at a time when bitcoin appears to be coming into its own as an alternative to traditional financial systems.

“As a call option on an alternative financial future in which U.S. dollar hegemony is decidedly less pronounced, Bitcoin retains attractive properties due to its max decentralization and (currently) fixed supply. While developed markets adoption may decelerate somewhat due to the reverberations of so many bankruptcies, and tighter global liquidity, our research in emerging markets continues to surface strong demand for Bitcoin and stablecoins amidst a generally lighter regulatory touch,” notes VanEck.

First Trust SkyBridge Crypto Industry and Digital Economy ETF (CRPT)

The First Trust SkyBridge Crypto Industry and Digital Economy ETF is an actively managed, equity-based crypto ETF and its approach leads nearly all of its holdings hailing from the technology and financial services sectors.

While the universe of crypto-correlated equities is expanding, it’s still relatively small. As such, crypto ETFs such as CRPT can feature concentrated lineups and that’s very much the case with the First Trust fund. Coinbase and bitcoin miner MicroStrategy combine for 42.10% of the fund’s roster. The next two holdings combine for 24%,meaning CRPT’s top four components command about two-thirds of its weight.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

BKCH XBTF CRPT

Other Topics

Cryptocurrencies Bitcoin Blockchain