Exchange-traded funds (ETFs) have been a popular type of security for decades now, offering a range of advantages and conveniences for investors at a retail and institutional level.
An ETF allows investors to hold multiple underlying assets rather than directly holding a single stock or bond. As a result, they can instantly diversify a portfolio and balance risk across different industries or targeted sectors.
Now, after much anticipation and controversy, cryptocurrency ETFs have arrived, and funds are funneling in beyond expectations.
In this article, let’s talk about the advantages of crypto ETFs and a handful of the most popular funds on the market that you might want to add to your watchlist or jump on board.
Advantages of Crypto ETFs
If you want to invest in crypto, why not just buy coins outright? That’s the question many are asking, but ETFs offer a few distinct advantages. Here are a few to consider.
Simplified Approach
While investing in crypto has become significantly easier because of exchange platforms like Binance, Kraken, and Coinbase, ETFs simplify the process even further for mainstream investors.
Crypto ETFs do not require you to create new accounts, learn new protocols, or transfer money into new places. They are constructed exactly as you’d expect, tracking key players in the blockchain space, as well as other emerging technologies of interest.
Keep in mind that in some instances, the term “crypto ETF” can be somewhat deceiving since few funds buy and hold specific cryptocurrencies for direct exposure. We’ll discuss this more later on – just remember to always research funds in full before diving in.
Professionally Managed
The big upside for ETF investors is the “set it and forget it” peace of mind you get from having these funds professionally managed by experts in the field.
In the case of crypto ETFs, fund managers hand-pick a range of different securities that are directly or indirectly related to blockchain technology and similar projects.
While this does mean that small fees are often added to the price of the products to cover expenses, it’s usually worth the extra cost for investors who want to minimize downside in an otherwise risky area of investment.
Secure and Efficient
For all the excitement surrounding crypto in 2021, critics often point out issues related to security and efficiency, especially when buying and holding crypto in digital or physical wallets. The SEC is one of crypto’s biggest critics when it comes to transactional security.
Crypto assets are prone to issues like hacks and leaks, and there are even many cases of owners losing the passwords or keys to access their own cryptocurrency collections – not good!
With blockchain ETFs, investors can rest assured that their funds are just as safe and protected as the other securities in their portfolios, making much more sense to crypto skeptics in retail and institutional circles.
When you consider that crypto still appears to be the wild west to many established investors, these ETFs are a good compromise to bring big money into the industry while keeping risk and uncertainty to a minimum.
Top Crypto ETFs in 2021
Without further delay, let’s get into our favorite crypto ETFs of 2021. We’ll talk assets under management (AUM), dividend yields, expense ratios, and key facts and figures you’ll want to know.
Purpose Bitcoin ETF (BTTC)
We start our list with the Bitcoin ETF from Purpose Investments for one simple reason – it’s the only ETF on our list that directly and exclusively holds Bitcoin for its investors and tracks the price of the cryptocurrency to the letter.
For those interested in Bitcoin but unsure about purchasing and holding it for themselves, this ETF deserves a closer look. Bitcoin is held securely and safely in cold storage, and it’s simple to trade, just like any other position in your portfolio.
Plus, it’s easier to track your gains and make sense of taxes if you decide to take profits, for asset managers and individuals managing their own crypto assets. Purpose offered the original and true crypto ETF, and we predict more products like this to appear in the future.
Amplify Transformational Data Sharing ETF (BLOK)
Amplify ETFs led the way during its debut in 2018 by creating one of the first crypto-forward ETFs, making waves, and attracting significant investment in the process.
The fund now boasts over $1 billion in total digital assets and an impressive average daily moving volume. Not to mention, BLOK has had a 30% positive price movement in the first half of 2021, which for some investors, is all they need to know.
Once again, this fund doesn’t offer direct exposure to cryptocurrency but instead invests in companies involved in developing and distributing blockchain technologies.
Argo Blockchain, Galaxy Digital Holdings, Coinbase, and Voyager Digital are just a few big names in the top holdings in this ETF. BLOK also features an annual dividend yield rate of $0.66, which certainly sweetens the deal.
We predict this fund will stay at the top of the crypto ETF list for years to come, with plenty more gains to be had.
Siren ETF Trust Siren Nasdaq NexGen Economy ETF (BLCN)
Often mentioned in the same breath as BLOK, this ETF from Siren has still outperformed the market so far this year with 16.5% returns. With $310 in AUM, it’s no small fund, although its holdings are not as directly engaged with blockchain technologies, despite its name.
In this fund, you’ll find names like SAP, Microsoft, Overstock.com, and Alphabet – not exactly the most adventurous mix. Still, the numbers don’t lie, and this might be an attractive ETF for tech-centric investors moving forward into the crypto evolution.
First Trust Indxx Innovative Transaction & Process ETF (LEGR)
More of a mid-cap play compared to the mighty BLOK and BLCN, this crypto-centric fintech ETF holds its own at over $100 million AUM.
The fund is more focused on developing efficient and secure financial transactions between legacy banks and institutions, so one might argue that this is one of the more conservative bets in the crypto ETF game.
The fund hasn’t performed amazingly well so far in 2021, but with big holdings like Fujitsu, Oracle, and several European banks, it might be a less risky ETF over the long haul.
Capital Link Innovation Shares NextGen Protocol ETF (KOIN)
It might be a smaller player at just $20 million AUM, but this ETF from Capital Link has been successfully marketed as a cryptocurrency investment product for the past couple of years.
Its ticker symbol KOIN would suggest that you’re getting tangible crypto coins or tokens added to your portfolio with this ETF, but that’s not quite the case. Instead, the top holdings in this ETF include NVIDIA, Intel, Oracle, and PayPal.
There are also some traditional financial services holdings in the mix, including Visa and Mastercard. Is this the true crypto ETF you’ve been looking for? Maybe not, but it’s worth a look as a solid fintech ETF nonetheless.
What’s Next for Crypto ETFs?
We’re thrilled to see more investment products being geared toward crypto and related fintech projects, and we expect to see a greater focus on ESG criteria that promote green energy and sustainable practices in the future.
The next step for crypto is renewable energy, so be on the lookout for funds that put a stronger emphasis on ESG strategies in the space.
Conclusion
Crypto ETFs even the playing field and spark excitement for this relatively new market. Add these ETFs to your watchlist and see where they go from here.
Sources:
5 Best Cryptocurrency ETFs Right Now | Investor Place
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