Cryptocurrency ETFs: What Are Your Options?

Cryptocurrency ETFs are exchange-traded funds that have some exposure to cryptocurrency assets and can be purchased on major stock exchanges.

ETFs can be an attractive option for people who are looking for managed investments with relatively low fees, but your options are limited when it comes to cryptocurrency. The simple reason is that the U.S. Securities and Exchange Commission hasn’t yet approved the public listing of ETFs based on the spot prices of Bitcoin, let alone those of other, less established cryptocurrencies. Instead, price movement for crypto ETFs are driven by derivatives like futures contracts.

It’s anybody’s guess when, or even whether, the SEC might shift its position on cryptocurrency ETFs, so you’ll have to make some trade-offs if you want a comparable product. Here are a couple of options:

Cryptocurrency Stock ETFs

There are ETFs available that are made up of the stock of multiple companies that own cryptocurrency or have some business in the world of cryptocurrency. These ETFs are linked to the world of crypto, but they do not actually own crypto. Instead, they hold shares in companies who have invested in crypto or whose business involves cryptocurrency trading, mining or other services.

Examples:

• Amplify Transformational Data Sharing ETF (BLOK): This fund is focused on blockchain technology and currently has approximately $416 million in net assets. Some of the cryptocurrency stocks in the Amplify fund’s portfolio include CME Group, a financial services company that works with products including Bitcoin and Ethereum and Coinbase Global Inc.

• First Trust Indxx Innovative Transaction & Process ETF (LEGR): This fund aims to track the investment performance of the Indxx Blockchain index. The LEGR ETF holds companies that are developing or using blockchain technology. This fund currently has over $118 million in total net assets, and top holdings include Infineon Technologies, AT&T Inc. and Honeywell International Inc.

• Siren NASDAQ Economy ETF (BLCN): This index fund is focused on investing in companies that have committed to research, development and usage of blockchain technology. This fund has over $110 million in net assets, and top holdings include JPMorgan Chase & Co., Mastercard Inc. and Oracle Corp.

Bitcoin ETFs

You can also get some exposure to Bitcoin through publicly traded Bitcoin ETFs, which are based on Bitcoin and can be purchased on public markets, but they do not actually hold Bitcoin. Instead, Bitcoin ETFs tend to contain derivatives such as futures contracts that reflect expectations of the price of Bitcoin at a later date.  But there’s a catch. These funds don’t actually hold Bitcoin. They hold derivatives linked to Bitcoin, which means their value may not be directly tied to the current market value of the largest cryptocurrency.

The first Bitcoin ETF debuted in late 2021 to significant excitement in the crypto world. Many saw the move as a sign that digital assets were becoming increasingly mainstream.

It’s worth noting, however, that Bitcoin ETFs don’t give you diversified access to the crypto world, because they only have exposure to one cryptocurrency. If you’re interested in exposure to Bitcoin, another option is to simply buy Bitcoin (though you might not be able to do that with your brokerage account).

Examples:

• Grayscale Bitcoin Trust (GBTC): This fund’s objective is to mirror the actual price of Bitcoin, minus fees and expenses. The fund currently has over $10 billion in assets under management, and the only holdings in GBTC are passive investments in Bitcoin.

• ProShares Bitcoin Strategy ETF (BITO): This actively managed fund seeks to provide investors with capital appreciation by investing in Bitcoin futures contracts. The fund has over $576 million in total net assets, and its holdings are primarily in Bitcoin futures contracts and U.S. Treasury bills.

• Global X Blockchain and Bitcoin Strategy ETF (BITS): This actively managed fund aims to capture long-term growth related to blockchain technology by investing in the Bitcoin futures contracts, as well as both U.S. and foreign blockchain companies. The BITS ETF currently has a little over $7 million in total net assets, and its largest holding — about 45% of its portfolio — is in the Global X Blockchain ETF (BKCH).

Over-the-counter funds

There are some funds that look a lot like ETFs and actually hold cryptocurrencies, but you’ll have to find them on over-the-counter markets. These are funds that have been previously sold only to accredited investors and are now available on some over-the-counter exchanges.

At an over-the-counter exchange, brokers connect individual parties with one another to buy and sell investments that do not meet listing standards for traditional stock exchanges. While this means such investments are available to more people, over-the-counter trading may not provide the same consumer protections as public markets such as the New York Stock Exchange.

Examples:

• Bitwise 10 Crypto Index Fund (BITW): This fund allows investors to gain exposure to the top ten largest cryptocurrencies by market capitalization. The fund currently has $325 million in assets under management, and its holdings change as cryptocurrencies fall in and out of the top 10, rebalanced on a monthly basis.

• Grayscale Digital Large Cap Fund (GDLC): This fund’s objective is to allow investors to gain exposure to large-cap digital assets, and it does so by holding some of the most valuable cryptocurrencies. GDLC has over $165 million in assets under management, and top holdings include Bitcoin, Ethereum and Cardano.

Some investment companies have packaged together baskets of promising cryptocurrencies and sold them privately, rather than to the general public. And some of those buyers are willing to sell them in over-the-counter transactions.