Investing in cryptocurrencies like Bitcoin can be a complex and technical adventure for investors. However, in recent years, and especially recently with BlackRock, as we mentioned in our article “Bitcoin’s Roller Coaster Ride: Buckle Up for Crypto Thrills!“, some investment funds have offered individual, professional, and institutional investors exposure to crypto-assets without the associated hassles. This has been made possible through Exchange Traded Funds (ETFs) linked to blockchain technology and cryptocurrencies. This article examines these 3.0 ETFs and explores their performance compared to Bitcoin.
Bitcoin-Related ETFs
Among the main Bitcoin-related ETFs, we find the American ETF ProShares Bitcoin Strategy (BITO) and the Valkyrie Bitcoin Strategy ETF (BTF). These ETFs do not directly hold Bitcoin but invest in Bitcoin futures contracts traded on the Chicago Mercantile Exchange (CME). They offer investors shares tied to these futures contracts rather than direct access to Bitcoin.
Other Cryptocurrency ETFs
Outside of these Bitcoin-specific ETFs, there are other more unconventional ETFs in the field of cryptocurrencies. For example, the Cryptocurrency Industry Innovators ETF (BITQ) invests in companies involved in the crypto economy, while the Global X Blockchain ETF (BKCH) invests in companies revolving around blockchain and digital assets. There are also ETFs such as the Amplify Transformational Data Sharing ETF (BLOK) and the VanEck Digital Transformation ETF (DAPP), which focus on the development and use of blockchain technologies.
Comparing Performance with Bitcoin
When comparing the performance of these ETFs with Bitcoin, it can be observed that since January 2021, the ETFs have not managed to outperform Bitcoin. However, they have allowed investors to be exposed to crypto-assets in a more controlled manner than direct Bitcoin purchases. Over shorter periods, there are variations in the performance of the ETFs, with some outperforming Bitcoin during certain bullish periods, while others perform better during bearish periods.
Factors Influencing ETF Performance
It is important to note that the performance of these ETFs is closely linked to the price movements of Bitcoin. They offer investors indirect exposure to the cryptocurrency market, including Bitcoin, through securities accounts. There are also Exchange Traded Products (ETPs) that track the performance of specific cryptocurrencies such as Ethereum, Cardano, Solana, Stellar, and Ripple.
In conclusion,
Crypto ETFs offer an alternative for investors looking to gain exposure to cryptocurrencies without the associated technical hassles. However, it is important to note that their performance is highly correlated with the price of Bitcoin, and each ETF has its own asset composition and weighting. Investors should therefore exercise caution and thoroughly understand the specific characteristics of each ETF before investing.
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