The cryptocurrency markets are on the road to recovery after the bear market of 2021-22. Investor faith in top cryptos remains strong; in fact, the top 10 cryptocurrencies accounted for 0.23% of the global money supply in 2023.
One effort seemingly geared to bring crypto into the mainstream is the adoption of crypto EFTs. With the launch of SEC-approved crypto future ETFs in 2021, traditional investor interest in the ecosystem reached unprecedented heights.
Crypto ETFs provide investors easy exposure to the crypto ecosystem while theoretically reducing volatility and risk factors.
Investors have compelling reasons to consider adding a crypto ETF to their portfolios in 2023. Notably, bitcoin continues to outperform gold, the S&P 500, the NASDAQ Composite, and many other asset classes in the long term.
In this article, our editors have rated and reviewed the top cryptocurrency ETFs as an alternative investment opportunity in 2023.
| ETF (ticker) | Year of Inception | Assets Under Management | Expense Ratio | Return (1-year) | Return (since inception) | Investing Strategy |
| Grayscale Bitcoin Investment Trust (GBTC) | 2013 | $16.1 B | 2.0% | 31.1% | 16,542.9% | Bitcoin holdings |
| Bitwise 10 Crypto Index Fund (BITW) | 2017 | $432 M | 2.50% | 11.5% | 117.1% | Major crypto-currencies |
| Grayscale Digital Large Cap Fund (GDLC) | 2018 | $231 M | 2.50% | 15.1% | 45.6% | Major crypto-currencies |
| Amplify Transformational Data Sharing ETF (BLOK) | 2018 | $466.4 M | 0.75% | 4.5% | 5.0% | Blockchain-related company equities |
| Siren NexGen Economy ETF (BLCN) | 2018 | $67.7 M | 0.68% | -41.8% | -1.2% | Blockchain-related company equities |
| First Trust Indxx Innovative Transaction & Process ETF (LEGR) | 2018 | $107.1 M | 0.65% | 16.3% | 6.6% | Blockchain-related company equities |
| ProShares Bitcoin Strategy ETF (BITO) | 2021 | $914 M | 0.95% | 19.8% | -36.6% | Bitcoin futures |
| Valkyrie Bitcoin Strategy ETF (BTF) | 2021 | $24.3 M | 0.95% | 28.3% | -60.4% | Bitcoin futures |
| Global X Blockchain & Bitcoin Strategy ETFs (BITS) | 2021 | $12.2 M | 0.65% | 63.0% | -48.2% | Bitcoin futures, other blockchain ETFs |
The List of Crypto Futures ETFs
Several crypto-focused funds can be purchased using online brokerage accounts. Currently, available cryptocurrency ETFs focusing on stocks related to blockchain and cryptocurrency index funds include:
Grayscale Bitcoin Investment Trust (GBTC)
An early mover in the cryptocurrency space, GBTC is an index fund that exposes investors to changes in bitcoin prices without buying the digital currency themselves.
Launched in 2013, GBTC holds bitcoin directly, enabling investors to gain exposure to price movements in the digital currency without opening a digital wallet to store bitcoin. GBTC has an expense ratio of 2%, higher than is typically the case with ETFs.
In 2021, Grayscale Investment hired David Lavelle to spearhead the attempt to convert GBTC into an ETF. An application to the SEC soon followed, which the agency rejected in 2022.
As of 2023, Grayscale remains the crypto investment industry’s most traded trust product, boasting 74% of the total trading volumes.
- Assets under management: $16.1 billion
- Expense ratio: 2.0%
- Returns (1 year): 31.12% (NAV as of September 2023)
- Returns since inception (2013): 16542.86%
- Investing Strategy: Bitcoin holdings
- BMJ Score: 4.5
GBTC performance, September 2022 – September 2023
Bitwise 10 Crypto Index Fund (BITW)
BITW is an index fund that exposes bitcoin and other major cryptocurrencies. The fund attempts to match the return of an index of the ten most highly valued cryptocurrencies.
The selected cryptocurrencies are screened and monitored for specific risks and weighted using market capitalization. As a result, the selected digital currencies rebalance monthly.
During the peak of the crypto bull run, BITW grew over ten times in assets under management. From an initial position of $120 million in assets, it rapidly grew to $1.2 billion by the end of 2021.
As of September 2023, the crypto index fund had assets worth $432 million AUM and is available for public trade.
- Assets under management: $432 million
- Expense ratio: 2.50%
- Returns (1 year): 11.5% (as August 2023)
- Returns since inception (2017): 117.1%
- Investing strategy: Major cryptocurrencies
- BMJ Score: 3.5
Bitwise 10 Index September 2022 – September 2023
Grayscale Digital Large Cap Fund (GDLC)
GDLC, an index fund that debuted in February 2018, offers investors exposure to various digital currencies. The fund offers investors the opportunity to gain exposure to the price movement of a basket of large-cap digital assets in a mutual fund vehicle, saving them the effort of buying and storing the assets themselves.
Initially, the fund’s assets were distributed between the following four major cryptocurrencies on a market-cap-weighted basis: Bitcoin, Ether, Bitcoin Cash, and Litecoin.
As of 2023, Bitcoin Cash and Litecoin are no longer part of the fund components. They were replaced by the following altcoins that gained a significant market cap after 2020 – Solana, Polygon, and Cardano.
However, the lion’s share of the fund allocation is still in Bitcoin (69.73%), followed by Ethereum (27.26%). The fund has significantly stabilized and made modest gains in 2023 after a tumultuous 2021-22.
- Assets under management: $231.03 million
- Expense ratio: 2.5%
- Returns (1 year): 15.10% (as August 2023)
- Returns since Inception(2018): 45.60%
- Investing Strategy: Major cryptocurrencies
- BMJ Score: 3.0
Blockchain ETFs
These ETFs do not invest directly in cryptocurrencies but in blockchain, the technology behind cryptocurrencies. (For more information, see our guide to Best Blockchain ETFs.)
First Trust Indxx Innovative Transaction & Process ETF (LEGR)
LEGR endeavors to track the performance of companies that use, invest in, develop, or have products expected to benefit from blockchain technology. It also invests in companies that stand to realize increased efficiency from the blockchain’s ability to improve the efficiency of various business processes.
While the majority of the holdings are located in the US (41%), the fund also has exposure to securities based in China (10%), India (7.6%), France (7.4%), and Germany (4.8%).
As of 2023, the top holdings of LEGR include NVIDIA Corp, Amazon, Oracle, Intel, Microsoft, AMD, Salesforce, and Accenture. The holdings are spread across finance, IT, industrial, utilities, healthcare, energy, and consumer staples.
- Assets under management: $107.1 million
- Expense ratio: 0.65%
- Returns (1 year): 16.32% (August 2023)
- Returns since inception (2018): 6.57%
- Investing Strategy: Blockchain-related company equities
- BMJ Score: 3.5
Amplify Transformational Data Sharing ETF (BLOK)
The BLOK ETF offers exposure to companies involved in the blockchain and digital sharing sector. The fund invests globally, with at least 80% of its holdings dedicated to the equity securities of companies actively involved in developing and utilizing transformational data-sharing technologies.
The fund holdings are spread across major crypto exchanges, IT firms, payment providers, bitcoin mining firms, and other financial service providers. As of 2023, they include Coinbase Global, Riot Platforms, SBI Group, Paypal, and Accenture.
- Assets under management: $466.4 million
- Expense ratio: 0.75%
- Returns (1 year): 4.54% (as August 2023)
- Returns since inception (2018): 5.03%
- Investing Strategy: Blockchain-related company equities
- BMJ Score: 3.0
Siren NexGen Economy ETF (BLCN)
The BLCN ETF, on the other hand, looks to achieve long-term growth by tracking the investment returns of an index linked to the blockchain economy. The linked index is the Siren Nasdaq Nexgen Economy Index.
The index is built to gain returns from companies focused on directing resources to developing, researching, supporting, innovating, or utilizing blockchain technology for their proprietary use or others.
BLCN results from a partnership between Siren and Nasdaq and involves collaboration in research, analysis, and investigation.
As of 2023, the top 10 holdings of the fund are spread across Coinbase, Microsoft, Mastercard, Paypal, AMD, IBM, and Overstock, to name a few.
- Assets under management: $67.65 million
- Expense ratio: 0.68%
- Returns (1 year): -41.79% (March 2023)
- Returns since inception (2018): -1.18%
- Investing Strategy: Blockchain-related company equities
- BMJ Score: 2.5
Bitcoin Futures ETFs
Instead of holding a crypto ETF, you could opt to hold a bitcoin futures ETF, which tracks the future price of bitcoin, through the convenience of an exchange-traded fund.
ProShares Bitcoin Strategy ETF (BITO)
BITO launched on Oct 19, 2021, as a game-changer in the crypto ETF segment. It was the first ETF in the US to gain the SEC’s approval to trade on a major US exchange. BITO does not directly invest in Bitcoin; the fund invests in futures contracts.
Fundamentally, BITO exposes investors to bitcoin without owning the digital asset themselves. The Commodity Futures Trading Commission regulates the future contracts that BITO invests.
In its very first year of operations, BITO took the market by storm, amassing $ 1.4 billion in assets in mere days and months. However, the ETF has suffered devaluation since then due to the wider market volatility.
- Assets under management: $914 million
- Expense ratio: 0.95%
- Returns (1 year): 19.83% (July 2023)
- Returns since inception (2021): -36.61%
- Investing Strategy: Bitcoin futures
- BMJ Score: 3.5
Valkyrie Bitcoin Strategy ETF (BTF)
Valkyrie Bitcoin Strategy ETF launched three days after BITO went public. Like BITO, BTF does not invest directly in bitcoin. Similarly, the Commodity Futures Trading Commission regulates trades.
BTF investors don’t have to file K-1 forms with the IRS as the investments are made through a Cayman Islands subsidiary. Like the BITO, the Valkyrie fund also has an expense ratio of 0.95%.
While BITO instantly hit the ground running, BTF had a fairly slow start in 2021. And two years later, BTF remains a fairly undersubscribed ETF when compared to BITO.
- Assets under management: $24.29 million
- Expense ratio: 0.95%
- Returns (1 year): 28.26% (as August 2023)
- Returns since inception (2021): -60.41%
- Investing Strategy: Bitcoin futures
- BMJ Score: 2.0
Global X Blockchain & Bitcoin Strategy ETF (BITS)
Global X Blockchain & Bitcoin Strategy ETF launched on November 16th, 2021 as the ETF’s provider’s second blockchain-related ETF. The first is the Global X Blockchain ETF (BKCH). Similar to the bitcoin ETFs mentioned above, BITS is a fund that invests in bitcoin futures.
However, BITS invests in blockchain-related equities found on Global X Blockchain ETF. As of 2023, the main holdings are BKCH ETF (46.19%), CME Bitcoin FUT BTCU3 (32.12%), and CME Bitcoin FUT BTCV3 (21.51%).
The total AUM of BITS has remained relatively stable despite the turmoil in the markets in 2022. From $10.6 million in 2021, the AUM hasn’t strayed north of $12.15 million as of Q3 2023.
- Assets under management: $12.15 million
- Expense ratio: 0.65%
- Returns (1 year): 62.96% (annualized, July 2023)
- Returns since inception (2021): -48.22%
- Investing Strategy: Bitcoin futures, other blockchain ETFs
- BMJ Score: 2.5
What Are Cryptocurrency ETFs?
An exchange-traded fund is a security that tracks an index, a commodity, or a basket of assets. Unlike a mutual fund, shares in the ETF are tradable like stock. The best ETFs regularly outperform mutual funds because of their diversity or a focus on reliable assets, making these attractive options in the traditional market.
The idea of digital ETFs (ETFs comprised of digital assets like crypto) has been a focal point for investors who see them as reliable and mature forms of investment in a new market. These ETFs solve several problems blocking cryptocurrency’s mass adoption and seem to be the next step in expanding this market.
That said, getting overwhelmed as a new crypto investor is relatively easy. Tens of thousands of digital tokens populate the market, not to mention hundreds of DeFi apps, complex trading pairs, and novel processes like staking and yield farming.
Cryptocurrency ETFs can help simplify investments by providing an easily digestible alternative. Investors can gain exposure to the lucrative blockchain ecosystem without directly entering an alien landscape. And since managed assets spread the investments across a broad range of handpicked tokens, the volatility is also somewhat dampened.
The rise of crypto ETFs is also vital for the continued growth and evolution of the broader ecosystems. The global ETF market holds nearly $10 trillion in AUM. Developing new ETFs based on digital assets will allow blockchain projects to tap into the capital available in traditional ETF markets.
What Are Crypto Futures ETFs and How Are They Different from Crypto NFTs?
Crypto futures ETFs function like crypto ETFs only backed by crypto futures contracts rather than physical crypto. Like conventional futures, bitcoin futures are contracts allowing two parties to agree on buying or selling bitcoin at a predetermined price and date.
That said, the value of a futures ETF derives from changes in the price of bitcoin futures rather than the price of bitcoin itself. It tracks the price of bitcoin futures instead of tracking the price of bitcoin.
Conversely, crypto spot ETFs track the actual price of the crypto itself. Spot ETFs’ main idea is to allow non-crypto savvy investors to get exposure to crypto without having them own the actual asset, using a familiar and regulated product.
What Are Spot Crypto ETFs?
A spot crypto ETF is an exchange fund that directly tracks an asset. So, rather than buying crypto now, the investor buys into a fund that owns that crypto. The investor holds a portion of that fund, rather than the currency itself, while still tracking the price of that crypto directly (rather than, say, futures).
In June 2022, the SEC declined Grayscale’s application to convert their long-standing spot bitcoin trust into a spot bitcoin ETF. Grayscale and several other asset managers had filed applications for spot crypto ETFs in late 2021.
The lawsuit in Federal Courts argued that a spot ETF market could support anti-fraud measures already approved by the SEC for crypto futures ETFs since they both follow the value of the same asset – bitcoin.
In August 2023, the Federal Appeals Court ruled in favor of Grayscale, leading to a landmark victory for the crypto industry. Along with Grayscale, BlackRock, ARK, Fidelity, and Invesco may be interested in reapplying for spot bitcoin ETFs in light of the recent developments.
While the SEC still has the option to appeal, the future does look brighter for spot crypto ETFs. Given the pace at which these things develop, we are likely months or years away from launching spot crypto ETFs.
Investors can now invest in various bitcoin and blockchain ETFs or buy and hold crypto directly. Use our guides below.
How to Invest in Crypto ETFs
Investing in a crypto ETF is similar to regular ETFs. You must start with a brokerage platform, the intermediary facilitating your transactions.
The next steps are relatively elementary – fund your brokerage account and browse the crypto ETFs on the interface. Pick one that fits your investment objectives and risk preferences, enter the number of shares you want and buy.
Many crypto ETFs also target multiple assets and securities besides actual cryptocurrencies/crypto futures. For instance, blockchain ETFs target corporations with exposure to blockchain technology.
The potential volatility and risk exposure from such ETFs can vary from funds based on assets or securities on the blockchain. You should only invest what you can afford to lose in crypto ETFs.
As with any volatile asset class, in-depth market research and fundamental analysis is essential before investing in a crypto ETF. Unlike traditional ETFs based on stocks, crypto ETFs will charge an annual expense ratio.
Investor Takeaway
After a bearish 2022, the crypto markets are more bullish in 2023. Leading the way for this newfound optimism could be the notable victories in the federal courts, particularly in the disputes between SEC and asset managers regarding the feasibility of spot crypto ETFs.
There are still some questions around crypto ETFs. Investors seeking to track bitcoin’s price directly will have to wait until the end of the year for some clarity from the SEC. If a bitcoin ETF does launch in the coming months, it will become a significant milestone in the evolution of crypto as a bona fide asset class for mainstream investors.
Like any other fund based on tech companies, investors face the risk (and reward) of investment. But these new frontiers in crypto investing are bringing crypto into the mainstream.
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- Source: https://www.bitcoinmarketjournal.com/cryptocurrency-etfs/
