10 Best Blockchain and Bitcoin ETFs
In this article, we discuss the 10 best blockchain and bitcoin ETFs. If you want to skip our discussion on the blockchain industry, you can go directly to the 5 Best Blockchain and Bitcoin ETFs.
According to CoinMarketCap, there are over 1.8 million cryptocurrencies in the world, with a market capitalization of $1.04 trillion as of September 2023. The market cap of cryptocurrencies reached an all-time high of $2.9 trillion in November 2021. Currently, there are 670 cryptocurrency exchanges worldwide where digital currencies are actively traded. Cryptocurrencies primarily rely upon blockchain technology to record transactions in a decentralized and secure manner. Bitcoin and Ethereum are the most dominant cryptocurrencies in the world, accounting for over 67% of the global cryptocurrency market capitalization. Both of these cryptocurrencies heavily depend on blockchain technology, which enables consensus, security, and the decentralized distribution of these digital assets. Notably, blockchain technology's application extends beyond cryptocurrency and finds utility in various sectors, such as supply chain management, healthcare, and identity verification. Popular companies like PayPal Holdings, Inc. (NASDAQ:PYPL), MicroStrategy Incorporated (NASDAQ:MSTR), and Block, Inc. (NYSE:SQ) also have exposure to the blockchain and cryptocurrency industry.
The Impact of Rising Interest Rates on Bitcoin
In the last year, the US Federal Reserve has increased the benchmark interest rates on seven occasions from 3.125% to 5.375% at midpoint. The most recent interest rate hike took place on July 27, and the Federal Reserve continues to express the possibility of further rate increases as a measure to control inflation, aiming to achieve its 2% target. The US consumer price index (CPI) for the month of July 2023 was recorded at 3.2%, and analysts anticipate the CPI to increase to 3.6% for August 2023. The CPI reached a four-decade high of 9.1% in June 2022, following which the Federal Reserve accelerated the pace of interest rate hikes. It is widely believed that rising interest rates are likely to hurt Bitcoin prices. However, recent market dynamics have contradicted this viewpoint. In the last year, despite the significant interest rate hikes by the US Federal Reserve and other central banks globally, the price of Bitcoin has observed a surge of 18.5%. Bitcoin emerged as one of the best-performing asset classes as it outperformed the 12.2% increase observed by the S&P 500 Index during the same period. Furthermore, Bitcoin even outperformed gold prices, which are traditionally considered a safe-haven asset during periods of rising inflation. Gold experienced a more modest increase of 15.5%.
Evolving Crypto Investment Landscape
Following the debut of the ProShares Bitcoin Strategy ETF (NYSEARCA:BITO) in October 2021, numerous Blockchain and Bitcoin funds have entered the market. Global X, a New York-based ETF provider, has been particularly active in this space, introducing three ETFs related to blockchain, with the Global X Blockchain ETF (NASDAQ:BKCH) being one of its most recognized products. Numerous retail investors have expressed interest in identifying the best crypto ETF offered by Vanguard, a prominent investment advisor based in Valley Forge, Pennsylvania, with an asset under management (AUM) of $7.7 trillion. While Vanguard does not offer a dedicated ETF exclusively focused on Blockchain and Bitcoin, the Grayscale Bitcoin Trust (OTC:GBTC) serves as one of the largest and most widely recognized Bitcoin investment funds, with a market value of $3.28 billion. The Grayscale Bitcoin Trust is an investment trust that charges an annual fee of 2% to cover insurance, management, and storage expenses. It holds actual Bitcoins on behalf of investors. Each share represents a fractional ownership interest in the trust's Bitcoin holdings. The investment fund enables investors to gain exposure to Bitcoin's price movements without having to directly hold or manage Bitcoins. It must be noted that the Grayscale Bitcoin Trust trades over-the-counter (OTC) as an unregistered security, so it can only be purchased through brokers. You can also check out the 13 Best Cryptocurrency Exchanges and Apps in the US in 2023 here.
Our Methodology
We have shortlisted the best blockchain and bitcoin ETFs based on their five-year performance as of September 14. For ETFs with a shorter history, we have looked at their performance since inception. While some of these ETFs have generated negative returns over the past 5 years, they have posted strong positive YTD returns, indicating their potential to offer healthy returns for investors in the future. These ETFs provide exposure to the blockchain and cryptocurrency sectors through various approaches, such as investing in Bitcoin futures or in companies with a strong connection to blockchain technology and cryptocurrencies.
Best Blockchain and Bitcoin ETFs
10. VanEck Bitcoin Strategy ETF (CBOE:XBTF)
5-Year Price Performance: -58.2%
Total Net Assets as of September 14, 2023: $41.95 million
Expense Ratio: 0.76%
VanEck Bitcoin Strategy ETF (CBOE:XBTF) invests in Bitcoin futures contracts and aims to provide exposure to Bitcoin price movements without needing to own the cryptocurrency. The ETF invests primarily in Bitcoin futures traded on the Chicago Mercantile Exchange (CME) using a passive, index-tracking strategy. It does not invest in Bitcoin directly or hold it, unlike the Grayscale Bitcoin Trust (BTC) (OTC:GBTC). Although the ETF has been in the red over the last 5 years, it has yielded a YTD return of 51.84% as of September 14.
9. AdvisorShares Managed Bitcoin Strategy ETF (NYSEARCA:CRYP)
Price Performance since Inception: -35.8%
Total Net Assets as of September 14, 2023: $402,060
Expense Ratio: 1.59%
AdvisorShares Managed Bitcoin Strategy ETF (NYSEARCA:CRYP) is an actively managed ETF that invests in Bitcoin futures contracts and money market funds. Like VanEck Bitcoin Strategy ETF (CBOE:XBTF), the ETF does not invest directly in Bitcoin but provides exposure to Bitcoin price movements through futures. The ETF is managed by AdvisorShares Investments, which is a thematic ETF issuer. As an active ETF, the manager can shift holdings, attempting to optimize returns rather than passively tracking an index. Due to its active management approach and specialized nature, the fund has a high expense ratio. The ETF has generated a YTD return of 29.25% as of September 14.
8. Fidelity Crypto Industry and Digital Payments ETF (NASDAQ:FDIG)
Price Performance since Inception: -24.0%
Total Net Assets as of September 14, 2023: $43.04 million
Expense Ratio: 0.39%
Fidelity Crypto Industry and Digital Payments ETF (NASDAQ:FDIG) is an actively managed ETF that invests in companies engaged in cryptocurrency, blockchain technology, and digital payments. The four biggest holdings of the ETF are Coinbase Global, Inc. (NASDAQ:COIN), Marathon Digital Holdings, Inc. (NASDAQ:MARA), Riot Platforms, Inc. (NASDAQ:RIOT) and CleanSpark, Inc. (NASDAQ:CLSK). Together, these four stocks have a combined weightage of over 43.2%. As an active ETF, Fidelity Crypto Industry and Digital Payments ETF (NASDAQ:FDIG) can shift allocations seeking to optimize exposure to the crypto/blockchain segment. The ETF does not invest in Bitcoin, Ethereum, or other cryptocurrencies directly; instead, it focuses on equities. The ETF's YTD return stands at 66.17% as of September 14.
7. Siren NASDAQ NexGen Economy ETF (NASDAQ:BLCN)
5-Year Price Performance: -12.5%
Total Net Assets as of September 14, 2023: $68.74 million
Expense Ratio: 0.68%
Siren NASDAQ NexGen Economy ETF (NASDAQ:BLCN) invests in companies focused on blockchain, Bitcoin, and quantum computing technologies. It is at the seventh place on our list of the 10 best blockchain and bitcoin ETFs.
The ETF’s holdings include cryptocurrency miners, exchanges, and service providers, as well as quantum computing and semiconductor companies. The ETF tracks the Indxx Blockchain Index, which contains companies involved in the nascent blockchain economy and provides exposure to emerging blockchain and cryptocurrency companies. Coinbase Global, Inc. (NASDAQ:COIN), MicroStrategy Incorporated (NASDAQ:MSTR), Galaxy Digital Holdings Ltd, and PayPal Holdings, Inc. (NASDAQ:PYPL) are the top four holdings of the ETF, representing 19% of the portfolio.
Here's what Wedgewood Partners said about PayPal Holdings, Inc. (NASDAQ:PYPL) in its Q2 2023 investor letter:
“PayPal Holdings, Inc. (NASDAQ:PYPL) was the leading detractor from performance during the quarter. Total payment volume grew +12% (foreign exchange neutral) while revenues grew +10% (FX-neutral) and adjusted operating earnings grew +19%. E-commerce industry sales trends have normalized back to their pre-pandemic trend of growth, with high-margin branded payments keeping track with the industry. Despite this, investors were concerned PayPal’s fast growing, private label payments solutions will dilute Company returns. However, payments are a very scalable business, and we expect the Company will be able to manage both private label and branded to achieve attractive returns and double-digit growth. Although multiples in the payment industry have compressed, especially after the multi-year process of being added to the financial sector, PayPal’s businesses are substantially different enough from traditional spread-based businesses, in addition to having much more compelling growth drivers, that PayPal’s well-below market multiple should revert to its higher, historical average.”
6. ARK Next Generation Internet ETF (NYSEARCA:ARKW)
5-Year Price Performance: 1.7%
Total Net Assets as of September 14, 2023: $1.37 billion
Expense Ratio: 0.88%
ARK Next Generation Internet ETF (NYSEARCA:ARKW) is the oldest and the biggest ETF on our list of the best blockchain and bitcoin ETFs in terms of net assets.
The actively managed ETF is focused on companies expected to benefit from next-gen internet technologies, including blockchain and cryptocurrency. ARK Next Generation Internet ETF (NYSEARCA:ARKW) is managed by Cathie Wood-led ARK Investment Management. The St. Petersburg, Florida-based asset management firm is known for identifying and investing in disruptive technologies. Coinbase Global, Inc. (NASDAQ:COIN) and Block, Inc. (NYSE:SQ) are two notable top holdings of the fund, representing over 14.8% of the ETF's portfolio.
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Disclosure: None. 10 Best Blockchain and Bitcoin ETFs is originally published on Insider Monkey.