Bitcoin ETFs: BTC price is now 66% off. Here’s the smart way to buy it
If you liked Bitcoin when it was worth $69,000 last year, you should love it now that it’s barely above $20,000. And ETFs offer more ways to participate.
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The go-to Bitcoin and ETF for many investors is the ProShares Bitcoin Strategy ETF (BITO). The ETF, which owns Bitcoin futures, accumulated more than $740 million in assets after just launching in October 2021. But it’s far from the only way to participate in the once-red-hot topic that’s now eerily cold.
“Many investors choose to access Bitcoin through traditional ETF wrappers because of their relative simplicity and familiarity,” said Roxanna Islam, analyst at VettaFi.
Cryptocurrency ETFs See Approaches
Apparently, it takes more than a Bitcoin winter to scare investors.
Investors continued to pour more than $400 million into a variety of cryptocurrency financial assets this year through June, CoinShares says. Bitcoin remains the most popular asset, attracting more than $240 million this year.
“U.S. digital asset investment products saw net inflows, suggesting some U.S. investors are using the selloff in Bitcoin prices as an opportunity to buy,” Islam said.
There is a lot of movement in the ETF industry to try to absorb some of this demand. In June, the ProShares Short Bitcoin Strategy ETF (BITI) became the first true inverse Bitcoin ETF. But also in June, the Securities and Exchange Commission rejected a plan to convert the Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF.
But there are many Bitcoin ETFs for investors to choose from.
Choose your theme with Bitcoin ETFs: Futures
There are four primary angles to Bitcoin ETFs as an investment, says Islam. It is important to determine the direction you want to approach the investment opportunity before trying to choose the best Bitcoin ETFs.
The Bitcoin ETFs most people think of are futures-based products. These are ETFs that use futures contracts linked to Bitcoin to expose investors to market ups and downs. If you are interested in this angle, ProShares is the Bitcoin strategy you should choose right now. It is the largest ETF in its class. The expense ratio of 0.95% is high for a diversified mutual fund, but in line with what many other Bitcoin ETFs charge.
Another Bitcoin ETF Strategy: Blockchain and Miners
It is unclear how long Bitcoin can last. Not only does it not hope up just when people expect it, during inflation, it faces stiff competition from other cryptocurrencies.
But one aspect of Bitcoin that is likely to stick around is the technology that powers it. Bitcoin uses blockchain technology to track its value. Blockchain is a digital ledger system that allows complete strangers to transact business with each other in a traceable manner. Many banks and financial institutions are looking for ways to use blockchain in their operations.
If you want to play blockchain, get there with the Siren Nasdaq NexGen Economy ETF (BLCN). The ETF with $130.4 million in assets charges 0.68% annually. Another angle on this backdoor approach to Bitcoin ETFs is actively managed ETFs, where portfolio managers try to pick their favorite plays. An example is the Amplify Transformational Data Sharing ETF (BLOK) with $577 million in assets. Its top inventory is Silvergate capital (SI) and Micro strategy (MSTR). You pay 0.71% a year as a fee.
Another opportunity for Bitcoin ETF investment
Some investors unwilling to bet on Bitcoin futures ETFs who believe the blockchain is too tangential may look to the crypto miners. ETFs like VanEck Digital Assets Mining (DAM) play this angle. You will find that owning stocks that Marathon Digital (MARA) and Riot Blockchain (RIOT).
“Depending on investor needs, there are different ways to invest in Bitcoin,” Islam said.
Best Bitcoin ETF Plays
| ETF | YTD % ch. | Assets (million USD) | Expense ratio | Startup | |
|---|---|---|---|---|---|
| Futures | |||||
| ProShares Bitcoin Strategy | (BITO) | -51.1% | $774.8 | 0.95% | 19 October 2021 |
| ProShares Short Bitcoin Strategy | (BITI) | NOW | 78 | 0.95 | 21 June 2022 |
| Blockchain / crypto-equity | |||||
| Siren Nasdaq NexGen economy | (BLCN) | -35.8% | 130.4 | 0.68 | 17 January 2018 |
| Invesco Alerian Galaxy Crypto Economy | (SATO) | -61.8% | 3.5 | 0.60 | 7 October 2021 |
| Crypto miners | |||||
| VanEck Digital Assets Mining | (DAM) | NOW | 1.5 | 0.50 | March 7, 2022 |
| Viridi Bitcoin Miners | (RIGZ) | -66.3% | 6.5 | 0.90 | 20 July 2021 |
| Blockchain/crypto equity (active) | |||||
| Strengthen transformational data sharing | (BLOCK) | -47.0% | 576.7 | 0.71 | 16 January 2018 |
| ARK next generation Internet | (ARKW) | -56.9% | 1,472 | 0.83 | September 29, 2014 |
Sources: IBD, S&P Global Market Intelligence, VettiFi
Follow Matt Krantz on Twitter @Matt Krantz
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