Only one asset lost you more money than Bitcoin

Bitcoin ETFs certainly failed to be a store of value – and turned out to be big losers this year so far instead. But at least they’re not the absolute worst asset you can buy.

X

Shares of the largest Bitcoin ETF, ProShares Bitcoin Strategy (BITO), are down a crushing 60% this year. That’s much worse than the more than 20% drop in the S&P 500. However, Bitcoin ETFs at least outpaced the disaster that has been Russia ETFs.

The iShares MSCI Russia ETF (ERUS) is the worst place in the entire ETF universe to put your money, says an analysis by Morningstar’s chief ETF researcher Ben Johnson. That’s down 99.8% this year.

And as a group, Russian ETFs have crashed in epic proportions. It is quite rare for a major class ETF to lose all of its value. And yet the VanEck Russia ETF (RSX) is down nearly 99%, as is the VanEck Russia Small-Cap ETF (RSXJ). All three of the year’s worst non-leveraged ETFs so far are Russia-related.

“Russian-focused ETFs stopped trading and the securities inside became worthless,” said Todd Rosenbluth, head of research at VettaFi.

Bitcoin ETFs were not the real inflation hedge

Entering the year, Bitcoin and cryptocurrency ETFs looked like easy bets. With inflation set to spiral higher, Bitcoin fans saw the cryptocurrency as a safe haven. But that theory failed miserably.

The wreckage among Bitcoin ETFs is devastating. Viridi Bitcoin Miners ETF (RIGZ) is down more than 76% this year, Morningstar says. That makes it the fourth-worst non-leveraged ETF this year in Morningstar’s database. And it is closely followed by a parade of lost Bitcoin-related games. VanEck Digital Transformation (DAPP) is down 75% and the Global X Blockchain ETF (BKCH) is down 74%.

Another type of ETF emerged as the real inflation hedge: energy. All 10 of the year’s top non-leveraged ETFs and related IPOs this year are energy plays, Johnson found. Leading the way are United States 12 Month Natural Gas (UNL) up 93% and United States Natural Gas (UNG), up 83%.

“Energy ETFs protected investor portfolios like no other in 2022 in an inflationary environment,” Rosenbluth said. “Most investors started 2022 with limited exposure to commodity ETFs and a modest weighting to energy stocks. But those who added to such positions were rewarded.”

Russia ETFs throw a curveball

As disappointing as cryptocurrency ETFs have been, Russian ETFs have been much worse.

Fortunately, much of the pain has been limited to Russian ETFs alone. The leading emerging market ETFs that used to include Russia have dumped the war-torn nation.

To be sure, the $20 billion iShares MSCI Emerging Markets ETF ( EEM ) in assets is down nearly 29% this year. The hit is due to a large 25% exposure to financial firms, says ETF.com. Many banks abroad are struggling as a strong dollar draws capital flows to the United States. Additionally, a more than 20% exposure to tech stocks doesn’t help emerging markets either. The top holding in the ETF, at nearly 6%, is Taiwan Semiconductor Manufacturing, a leading chipmaker. But shares are down nearly 40% as the world works through an abundance of many types of computer chips.

But at least that’s about a 5% exposure to energy. And there are no Russian stocks. The ETF’s top exposure is to Hong Kong, at 26%, followed by Taiwan and India at about 14% each. And there is no huge Bitcoin exposure either.

“Fortunately for most investors focused on emerging markets, Russia had previously shrunk to a relatively small weight compared to China, India and Taiwan, softening the blow,” Rosenbluth said.

Best and worst non-leveraged ETFs this year so far

Russia is even worse than Bitcoin ETFs

Source: Morningstar