Bitcoin and the broader digital asset market have never been more popular. As a result, there is a growing crop of exchange-traded funds (ETFs) structured to track the market for investors interested in gaining exposure to it. The following is a brief list highlighting some of the more popular options, with each offering a unique approach/appeal.
Digital Asset ETFs
1. iShares Bitcoin Trust
The iShares Bitcoin Trust (IBIT) is an exchange-traded fund (ETF) that provides investors with exposure to Bitcoin without the need to hold the cryptocurrency directly. It operates by holding Bitcoin as its underlying asset and aims to mirror the performance of Bitcoin’s market price.
It is managed by BlackRock, the world’s largest asset manager, with over $9 trillion in assets under management as of Q1 2023. BlackRock is renowned for its extensive range of investment products and services.
What sets it apart from direct competitors?
- Management and Reputation: Managed by BlackRock, IBIT benefits from the firm’s significant experience and reputation in the financial industry.
- Fees: IBIT has a competitive fee structure. Initially, it has a standard fee of 0.25%, which is reduced to 0.12% for the first $5 billion in assets or 12 months, whichever comes first.
- Custodians: The ETF uses Coinbase as its crypto custodian and spot market data provider, with BNY Mellon serving as the cash custodian. This combination ensures high standards of security and reliability.
- Authorized Participants: The fund has a strong network of authorized participants, including JP Morgan Securities, Jane Street Capital, Macquarie Capital, and Virtu Americas.
Since its launch in January 2024, IBIT has quickly gained traction among investors due to its association with BlackRock and its effective fee-reduction strategy. This ETF set multiple records for the pace at which it has accrued capital and boasts over $18B in AUM at the time of writing.
2. ProShares Bitcoin Strategy ETF
The ProShares Bitcoin Strategy ETF (BITO) is an exchange-traded fund that offers investors exposure to Bitcoin through futures contracts rather than direct ownership of the cryptocurrency. It aims to provide investment results that generally correspond to the performance of Bitcoin as measured by the price of Bitcoin futures.
BITO is managed by ProShares, a prominent provider of specialized ETFs known for its innovative and diverse range of investment products. ProShares is well-regarded for pioneering the first U.S.-based Bitcoin-linked ETF.
What sets it apart from direct competitors?
- Futures-Based Approach: Unlike spot Bitcoin ETFs, BITO invests in Bitcoin futures contracts, offering indirect exposure to Bitcoin. This structure can appeal to investors who prefer not to handle the complexities and risks associated with directly holding cryptocurrencies.
- Regulatory Approval: BITO was the first U.S.-based Bitcoin ETF approved by the SEC, marking a significant milestone and setting it apart as a pioneer in the market.
- Accessibility: It allows traditional investors to gain Bitcoin exposure through a familiar investment vehicle traded on conventional exchanges.
- Management Expertise: ProShares’ expertise in managing futures-based products and its robust infrastructure provides a high level of trust and reliability.
Since its launch in October 2021, BITO has attracted significant investor interest. Initially, the ETF saw a strong inflow of investments, reflecting the high demand for Bitcoin exposure through a regulated ETF. However, its performance has been closely tied to the volatile nature of Bitcoin futures, resulting in periods of both gains and losses.
3. ProShares Short Bitcoin Strategy ETF
The ProShares Short Bitcoin Strategy ETF (BITI) is an inverse exchange-traded fund designed to provide investors with an opportunity to profit from declines in the price of Bitcoin. Unlike traditional Bitcoin ETFs, BITI seeks to achieve its investment objective by taking short positions in Bitcoin futures contracts, meaning it gains value when Bitcoin prices fall.
BITI is managed by ProShares, a leader in the ETF industry known for offering a wide range of innovative investment products. ProShares has been at the forefront of bringing cryptocurrency-related ETFs to the market, including the first U.S.-based Bitcoin futures ETF.
What sets it apart from direct competitors?
- Inverse Exposure: BITI is unique in that it allows investors to benefit from falling Bitcoin prices. This is particularly useful for those looking to hedge their portfolios against potential declines in the cryptocurrency market.
- Futures-Based Strategy: Like other ProShares Bitcoin ETFs, BITI uses Bitcoin futures contracts to achieve its investment goals. This approach provides regulated exposure without the need to directly hold Bitcoin.
- Accessibility and Liquidity: BITI offers an accessible way for traditional investors to short Bitcoin using a familiar ETF structure, traded on conventional exchanges.
BITI was launched in June 2022 and has since provided investors with a means to profit during periods of declining Bitcoin prices. Like its sister ETF from Pro-Shares, BITI, its performance is closely linked to the volatility of the Bitcoin market, with periods of both gains and losses.
4. Siren Nasdaq NexGen Economy ETF
The Siren Nasdaq NexGen Economy ETF (BLCN) is an exchange-traded fund that seeks to track the performance of the NASDAQ Blockchain Economy Index. The fund invests in companies actively involved in developing, researching, and utilizing blockchain technologies. As such, it offers investors exposure to the broader blockchain ecosystem beyond just cryptocurrencies.
BLCN is managed by Siren ETF Trust in collaboration with Nasdaq. Siren is known for creating ETFs that target emerging and transformative sectors, and the partnership with Nasdaq adds credibility and a robust framework for the fund.
At the time of writing, the five largest holdings within this ETF are as follows.
- MicroStrategy Inc
- NU Holdings Ltd/Cayman Islands
- Cleanspark Inc
- Marathon Digital Holdings Inc
- Robinhood Markets Inc
Cumulatively, these represent ~18% of the fund’s market value.
What sets it apart from direct competitors?
- Diversified Blockchain Exposure: BLCN focuses on a wide range of companies involved in blockchain technology, including those in digital asset mining, blockchain applications, blockchain transactions, blockchain hardware, and blockchain integration.
- Index-Based Approach: The ETF tracks the NASDAQ Blockchain Economy Index, which provides a structured and systematic way to gain exposure to the blockchain sector.
- Established Companies: The fund includes holdings in large, well-known companies such as PayPal, Alibaba, Coinbase, Baidu, Tencent, Overstock, Visa, Microsoft, Nvidia, and Robinhood Markets. This diversified approach mitigates risk compared to single-asset or single-company investments.
Launched in January 2018, BLCN has experienced volatility, which is reflective of the broader blockchain and cryptocurrency markets. Despite significant downturns during bear markets, the ETF has shown resilience due to its diversified holdings. The performance data should be reviewed for the most current insights, but historically, it has seen periods of both substantial gains and losses.
5. Amplify Transformational Data Sharing ETF
The Amplify Transformational Data Sharing ETF (BLOK) is an actively managed exchange-traded fund that invests in companies involved in developing and utilizing blockchain technologies. It provides investors with diversified exposure to the blockchain ecosystem, including both direct blockchain technology developers and companies that benefit from blockchain adoption.
BLOK is managed by Amplify Investments, a firm known for creating innovative ETFs that target emerging and transformative sectors. The active management approach allows the fund to dynamically adjust its holdings based on market conditions and the evolving blockchain landscape.
At the time of writing, the five largest holdings within this ETF are as follows.
- Core Scientific Inc
- Galaxy Digital Holdings Ltd
- Coinbase Global Inc
- MicroStrategy Inc
- Block Inc
Cumulatively, these represent ~21% of the fund’s market value.
What sets it apart from direct competitors?
- Active Management: Unlike many blockchain ETFs that passively track an index, BLOK is actively managed. This allows the fund managers to make tactical adjustments to the portfolio to capitalize on emerging opportunities and manage risks.
- Broad Exposure: BLOK invests in a wide range of companies, including those directly involved in blockchain technology, such as miners and software developers, as well as companies benefiting indirectly, like financial services firms.
- Global Reach: The fund includes holdings from companies around the world, providing global exposure to the blockchain sector.
- Diverse Holdings: Top holdings include prominent blockchain and technology companies such as MicroStrategy, Square, NVIDIA, and PayPal, among others, ensuring a broad exposure to the sector’s potential growth areas.
Launched in January 2018, BLOK has shown periods of strong performance during blockchain technology’s bullish phases and downturns during bear markets. At the time of writing, BLOK boasted ~$700M in AUM.
6. Honorable Mention
No active ETFs track Ethereum (ETH) performance in the United States. However, this will soon change, as multiple have already been approved for launch. When this occurs, investors would be wise to consider them as part of their portfolio.
Final Thoughts
Gaining exposure to the digital asset sector has never been easier for the modern investor. Whether you are a Bitcoin maximalist, short the market, or only interested in mining endeavors, there is something for everyone.
To that end, visit our list of the top stock brokers in the United States, or your respective region.
