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Is this cryptocurrency ETF a super easy purchase?
This unique ETF gives you broad exposure to all things cryptocurrency. But there’s a problem.
Do you want to go long on cryptocurrencies? You can always buy goods like Bitcoin OR Ethereum directly. But the future of cryptocurrencies can be difficult to predict. No one knows who the biggest winners will be in the next decade.
There is a way to profit from the rise of cryptocurrencies without actually betting on the cryptocurrencies themselves. This is done by investing in companies that sell products and services that will help the crypto economy function. Chipmakers, miners, software developers, third-party payment processors, cloud computing providers – all will be needed if the cryptocurrency economy takes off.
Do you want to invest in a basket of stocks that will directly benefit from the long-term cryptocurrency boom? Look no further than this little-known exchange-traded fund (ETF).
This crypto ETF gives you instant diversified exposure
THE Bitwise Crypto Industry Innovators ETF (BITQ 4.38%) was launched about three years ago, in May 2021. At the time, Bitwise Asset Management – the creators and managers of the ETF – described the fund as a way to give investors “exposure to public companies of value that participate in the growth of the bitcoin and cryptocurrency sectors.” The company wanted to provide a way for “investors to gain exposure to the cryptocurrency market without the challenges of directly owning crypto assets like Bitcoin and Ethereum.”
The strategy is simple: monitor the performance of the Bitwise Crypto Industry Innovators 30 Index, which aims to invest in pure-play cryptocurrency companies and businesses with over $100 million in crypto assets on their balance sheets. The current list includes 30 names. “Today, there are a growing number of public companies capitalizing on cryptocurrencies, with many more to come,” explained Matt Hougan, Chief Information Officer at Bitwise. “BITQ aims to identify these assets and provide access to investors.”
The current portfolio is dominated by companies with direct ties to the cryptocurrency sector. Its two largest holdings, which amount to nearly 25% of the ETF’s holdings, are MicroStrategy AND Global Coinbase. These are two of the markets favorite crypto stocks. MicroStrategy, a data analytics company, currently holds Bitcoin holdings worth around $14 billion. It’s about half its current size value of the company. Coinbase, on the other hand, operates one of the largest and most renowned cryptocurrency exchanges in the world.
If you’re looking for instant crypto exposure, this ETF offers it. But how has it performed since it hit the market in 2021?
Is this the best crypto ETF for you?
On paper, the Bitwise Crypto Industry Innovators ETF is perfect for investors looking to gain exposure to the cryptocurrency economy.
But there is a serious problem: the ETF’s performance over the past three years has been disappointing. During this period, the price of Bitcoin increased by 22%. The ETF, however, lost around 41% of its value. The S&P 500 has actually performed better than both, rising 38% in value over the past three years.
There’s another problem with the Bitwise Crypto Industry Innovators ETF: It’s expensive.
His expense ratio – the amount you have to pay the manager each year for the right to hold the ETF – is 0.85%. Buying Bitcoin directly, for comparison, allows you to hold the asset for free forever. Many S&P 500 ETFs, meanwhile, have expense ratios of less than 0.1%. It seems like a small disadvantage, but those fees can add up over time.
When you consider this ETF’s expenses, its total performance is even worse than the chart above suggests. The Bitwise Crypto Industry Innovators ETF may still be a viable option if you’re looking for crypto exposure without actually buying cryptocurrencies, but its disappointing track record and high fees make it unsuitable for most investors.
Ryan Vanzo has positions in Bitcoin and Ethereum. The Motley Fool has positions and recommends Bitcoin, Coinbase Global, and Ethereum. The Motley Fool has a disclosure policy.