There has been a lot of frenzy surrounding crypto exchange-traded funds, or ETFs. Some experts believe the crypto market bear run is ending as digital asset companies mount pressure on the U.S. Securities and Exchange Commission (SEC) and its chair Gary Gensler to approve ETFs.
2022 was a disappointing year for digital currency ETFs, ending in a market slump that saw bitcoin (BTC) shed almost $30K from its price at the start of the year. However, this year the leading cryptocurrency by market capitalization has risen by about 75% from its January 2023 value.
As the markets prepare to see off the financial year, let’s explore how 2023 treated the presently registered crypto ETFs. This article showcases the top ETFs according to investors.
What is a cryptocurrency ETF?
A cryptocurrency ETF, or exchange-traded fund, is a type of investment vehicle designed to track the performance of one or several crypto assets. It allows investors to buy digital currencies like bitcoin (BTC) or ethereum (ETH) without actually owning the assets themselves.
Crypto ETFs are very similar to traditional financial market ETFs, where investors can buy shares of stocks or commodities. The profits or losses they make depend on the price movement of these shares, determined by the price fluctuations within the crypto market.
The top 5 best performing crypto ETFs in 2023
Selecting a crypto ETF requires careful consideration of several factors, including chart analysis and aspects of the CAN SLIM method devised by William J. O’Neal to identify the best-performing stocks.
A healthy market capitalization and sufficient daily average volume are typically indicative of a strong-performing and liquid ETF. Many experts also advocate for potential crypto investors to choose leading ETF cryptocurrencies, such as bitcoin and ether, that have demonstrable growth and adoption rates.
The price of the ETF cryptocurrency can be affected by numerous factors, including supply fluctuations and new use cases, which can impact its performance.
Investors also need to understand market direction, as even strong-performing stocks can underperform in a downward-trending market.
Despite the crypto market’s current bullish outlook, experts advise caution due to existing recession fears and high inflation.
With that in mind, these are the most popular crypto ETFs among buyers as 2023 comes to a close:
Bitwise Crypto Industry Innovators ETF (BITQ)
Bitwise Crypto Industry Innovators ETF (BITQ) is one of the top-performing crypto ETFs of 2023. It tracks the total return performance of the Bitwise Crypto Innovators 30 Index. The index measures the performance of companies leading the crypto industry and economy.
The ETF invests in securities of the index and depositary receipts representing securities of the index, providing investors with exposure to companies actively participating in the cryptocurrency sector.
| Analysis Date | Nov. 21, 2023 |
| Year to Date (YTD) Daily Return | 122.12% |
| Expense Ratio | 0.85% |
| 1-Year Daily Total Return | 85.01% |
| Assets Under Management (AUM) | $90.6M |
Valkyrie Bitcoin Miners ETF (WGMI)
The Valkyrie Bitcoin Miners ETF (WGMI) – currently trading on the NasdaqGM – is an actively managed investment vehicle aiming to deliver returns to investors.
It primarily invests about 80% in securities of companies that generate at least half of their revenue from Bitcoin mining activities or provide specialized chips, hardware, software, or other services to Bitcoin mining companies.
| Analysis Date | Nov. 21, 2023 |
| Year to Date (YTD) Daily Return | 113% |
| Expense Ratio | 0.75% |
| 1-Year Daily Total Return | 78.80% |
| Assets Under Management (AUM) | $21.4M |
Hashdex Bitcoin Futures ETF (DEFI)
Hashdex Bitcoin Futures ETF (DEFI) offers investors an opportunity to gain price exposure to the BTC market. The fund aims to provide an avenue for those looking to explore the market’s potential through investment in the Benchmark Component Futures Contracts and cash equivalents. Still, it doesn’t directly invest in Bitcoin.
| Analysis Date | Nov. 21, 2023 |
| Year to Date (YTD) Daily Return | 112.56% |
| Expense Ratio | 0.94% |
| 1-Year Daily Total Return | 129.91% |
| Assets Under Management (AUM) | $2.3M |
VanEck Bitcoin Strategy ETF (XBTF)
Launched on November 15, 2021, the VanEck Bitcoin Strategy ETF (XBTF) is an actively managed ETF that seeks capital appreciation by investing in Bitcoin futures contracts.
The fund provides investors with a liquid, cost-efficient, and transparent way to gain investment results that closely correspond to the performance of Bitcoin. XBTF invests in standardized, cash-settled Bitcoin futures contracts traded on commodity exchanges registered with the Commodity Futures Trading Commission (CFTC).
| Analysis Date | Nov. 21, 2023 |
| Year to Date (YTD) Daily Return | 111.45% |
| Expense Ratio | 0.76% |
| 1-Year Daily Total Return | 131.59% |
| Assets Under Management (AUM) | $64.8M |
Valkyrie Bitcoin and Ether Strategy ETF (BTF)
The Valkyrie Bitcoin and Ether Strategy ETF (BTF) was incepted in October 2021, and is an actively managed fund that facilitates investors with profits obtained from capital appreciation.
The ETF purchases a number of Bitcoin and Ether futures contracts to gain exposure to the price movements of these cryptocurrencies, so it doesn’t directly hold Bitcoin or Ethereum.
| Analysis Date | Nov. 21, 2023 |
| Year to Date (YTD) Daily Return | 110.10% |
| Expense Ratio | 1.20% |
| 1-Year Daily Total Return | 130.69% |
| Assets Under Management (AUM) | $34.1M |
Cryptocurrency ETFs for investors to watch in 2024
The consensus among many crypto watchers is that cryptocurrency ETFs could perform exponentially in the coming year, especially with the anticipated approval of spot ETFs.
Here’s a crypto ETF list to watch out for in 2024:
ProShares Bitcoin Strategy ETF (BITO)
The first U.S. Bitcoin-based ETF, Proshares Bitcoin Strategy ETF (BITO), known for being the oldest crypto index and offering direct exposure to Bitcoin, is among the good crypto ETFs to watch in 2024.
The BITO ETF is designed to provide a cost-effective and convenient way for investors to gain exposure to the price of Bitcoin. It provides this exposure without buying, storing, or maintaining Bitcoin, saving investors the trouble of handling complex seed phrases for digital wallets.
| Analysis Date | Nov. 21, 2023 |
| Year to Date (YTD) Daily Return | 112.22% |
| Expense Ratio | 0.95% |
| 1-Year Daily Total Return | 130.81% |
| Assets Under Management (AUM) | $1.356B |
Global X Blockchain & Bitcoin Strategy ETF (BITS)
Launched in 2021, the actively managed Global X Blockchain & Bitcoin Strategy ETF (BITS) allows investors to directly or indirectly obtain equity securities of companies involved in blockchain technology at large. It also invests in Bitcoin futures contracts, a bonus for investors.
| Analysis Date | Nov. 21, 2023 |
| Year to Date (YTD) Daily Return | 118.88% |
| Expense Ratio | 0.65% |
| 1-Year Daily Total Return | 109.48 |
| Assets Under Management (AUM) | $28.79M |
Simplify Bitcoin Strategy PLUS Income ETF (MAXI)
The Simplify Bitcoin Strategy PLUS Income ETF (MAXI), launched on September 29, 2022, is a fund that achieves its investment objective by using three strategies:
- Bitcoin futures strategy: The fund invests in Bitcoin futures contracts to gain exposure to the performance of Bitcoin.
- Income strategy: Using the fund, investors can invest in short-term debt instruments like marketable securities, bonds, and lease payments to generate income.
- Option overlay strategy: This strategy involves creating exchange-traded put and call option spreads on securities, index futures, or ETFs that the fund’s adviser deems to be strongly correlated with Bitcoin futures. Typically, these selected option spreads have a limited time until expiration and are subject to active trading
| Analysis Date | Nov. 21, 2023 |
| Year to Date (YTD) Daily Return | 117.3% |
| Expense Ratio | 0.11% |
| 1-Year Daily Total Return | 136.68% |
| Assets Under Management (AUM) | $32.3M |
How to find the best ETFs
ETFs can be purchased through an online broker or through exchanges like the Nasdaq or New York Stock Exchange (NYSE). But before making the purchase, below are some of the factors investors may want to keep in mind to avoid making poor decisions.
Solid performance and trading volume
It may help to look for ETFs with a proven track record of solid returns over time. The top performers will likely be those focused on major cryptocurrencies like BTC and ETH.
Additionally, it may be worth considering an ETF with high trading volume, at least 50,000 shares a day. Higher volume means buying and selling shares more easily without impacting the price.
Moreover, compare an ETF’s year-to-date and one-year returns to see which has the best returns record. Though past performance doesn’t guarantee future results it can indicate how adept the fund is at navigating the crypto market. ETFs with at least $10 million in assets are likely to be more established and less risky.
Exposure
Investors should decide if they watn an ETF focused on the broad crypto market, just bitcoin, or other specific digital coins like ethereum or altcoins. As always, in any form of business or investment, diversity means less volatility.
Low fees
Cryptocurrency ETFs often charge higher fees than standard ETFs due to the complex nature of the assets. However, there are options with relatively low fees. Look for ETFs with expense ratios under 1% per year.
Reputable provider
It may be worth considering ETF providers with a proven track record in cryptocurrency and blockchain investments.
Risks and drawbacks of investing in crypto ETFs
While crypto ETFs provide a convenient way to gain exposure to cryptocurrencies, there are a number of risks and downsides to be aware of.
Volatility
The cryptocurrency market is notoriously volatile, and crypto ETFs track the prices of crypto assets like Bitcoin and Ethereum, so their share prices can swing wildly. The value of an investment could drop substantially in a short period, as suchinvestors should only invest money they can afford to lose.
Management fees
Crypto ETFs charge management fees, typically 1% per year, to operate the fund. These fees reduce total returns over time and can add up significantly if share are held for many years.
The fees may be higher than those for traditional ETFs due to the complexity of managing cryptocurrency investments.
Limited options
Currently, only a handful of crypto ETFs are available to investors in the U.S. and Canada. They primarily focus on major cryptocurrencies like Bitcoin and Ethereum, other crypto assets may not have an ETF option available.
However, the choices are expanding over time as more providers enter the market and regulators approve different types of exchange-traded funds.
FAQs
How does a crypto ETF work?
A cryptocurrency exchange-traded fund is an exchange-traded product that tracks the price movements of one or several digital currencies by investing in instruments linked to them in a portfolio.
They are divided into shares and traded on the traditional stock exchange. Crypto ETFs help investors gain exposure to the crypto market without having to purchase virtual currencies themselves.
Are crypto ETFs a good investment?
There is no direct answer to this question; it is a matter of risk tolerance and preferences. Crypto ETFs are generally speculative investments.
However, for some investors, the benefits of convenience, diversity, and professional management may outweigh the risks. As with any investment, investors must do their research to ensure a crypto ETF aligns with their financial goals, and go in with their eyes wide open to the potential risks and downsides
Which ETF is best for Bitcoin?
It’s impossible to objectively state which the best ETF for Bitcoin is. However, some of the most populare ETFs among investrs include Valkyrie Bitcoin Strategy ETF (BTF), Hashdex Bitcoin Futures ETF (DEFI), ProShares Bitcoin Strategy ETF (BITO), and Global X Blockchain & Bitcoin Strategy ETF (BITS).
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