Bitcoin ETF Strategy: Smart Way To Buy Bitcoin

Bitcoin ETF Strategy: Smart Way To Buy Bitcoin
Bitcoin ETF Strategy: Smart Way To Buy Bitcoin

If you liked Bitcoin when it was worth $69,000 last year, you should love it now that it’s barely over $20,000. And ETFs offer several ways to participate.

The go-to Bitcoin and ETF for many investors is the ProShares Bitcoin Strategy ETF (BITO). The ETF, which owns Bitcoin futures, accumulated more than $740 million in assets after just launching in Oct. 2021. But it’s far from the only way to participate in the once red-hot theme that’s now eerily gone cold.

“Many investors are choosing to access Bitcoin through traditional ETF wrappers due to their relative simplicity and familiarity,” said Roxanna Islam, analyst at VettaFi.

Cryptocurrency ETFs See Inflows

Apparently, it takes more than a Bitcoin winter to scare off investors.

Investors still poured more than $400 million into a host of cryptocurrency financial assets this year through June, says CoinShares. Bitcoin remains the most popular asset, luring in more than $240 million this year.

“U.S. digital asset investment products saw net inflows, suggesting that some U.S. investors are using the sell-off in Bitcoin prices as an opportunity to buy,” Islam said.

There’s lots of movement in the ETF industry to try to soak up some of this demand. In June, the ProShares Short Bitcoin Strategy ETF (BITI) become the first true inverse Bitcoin ETF. But also in June, the Securities and Exchange Commission turned down a plan to convert the Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF.

But there are plenty of Bitcoin ETFs for investors to choose from.

Pick Your Theme With Bitcoin ETFs: Futures

There are four primary angles on Bitcoin ETFs as an investment, Islam says. It’s important to decide the direction you want to approach the investment opportunity before you try to choose the best Bitcoin ETFs.

The Bitcoin ETFs most people think of are the futures based products. These are ETFs that use futures contracts tied to Bitcoin to expose investors to the ups and downs of the market. If you’re interested in this angle, the ProShares Bitcoin Strategy is your go-to right now. It’s the largest ETF in its class. The expense ratio of 0.95% is high for a diversified mutual fund, but in line with what many other Bitcoin ETFs charge.

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Another Bitcoin ETF Strategy: Blockchain And Miners

It’s unclear how much longevity Bitcoin might have. Not only is it not holding up just when people would expect it to, during inflation, it faces stiff competition with other cryptocurrencies.

But one aspect of Bitcoin likely to stick around is the technology that powers it. Bitcoin uses blockchain technology to track its value. Blockchain is a digital ledger system that allows complete strangers to do business with each other in a trackable way. Many banks and financial institutions are looking for ways to use blockchain in their business.

If you’re looking to play blockchain, the Siren Nasdaq NexGen Economy ETF (BLCN) gets you there. The $130.4 million-in-assets ETF charges 0.68% annually. Another angle on this backdoor approach to Bitcoin ETFs are actively managed ETFs, where portfolio managers try to choose their favorite bets. An example is the Amplify Transformational Data Sharing ETF (BLOK) with $577 million in assets. Its top holdings are Silvergate Capital (SI) and MicroStrategy (MSTR). You’ll pay 0.71% a year as a fee.

One More Option For Bitcoin ETF Investing

Some investors, not willing to bet on Bitcoin futures ETFs who think blockchain is too tangential might look at the crypto miners. ETFs like VanEck Digital Assets Mining (DAM) play this angle. You’ll find it owning stocks like Marathon Digital (MARA) and Riot Blockchain (RIOT).

“Depending on investor needs, there are different ways to invest in Bitcoin,” Islam said.

Top Bitcoin ETF Plays

ETF YTD % ch. Assets ($ millions) Expense ratio Inception
ProShares Bitcoin Strategy (BITO) -51.1% $774.8 0.95% Oct. 19, 2021
ProShares Short Bitcoin Strategy (BITI) N/A 78 0.95 June 21, 2022
Blockchain / crypto equity
Siren Nasdaq NexGen Economy (BLCN) -35.8% 130.4 0.68 Jan. 17, 2018
Invesco Alerian Galaxy Crypto Economy (SATO) -61.8% 3.5 0.60 Oct. 7, 2021
Crypto miners
VanEck Digital Assets Mining (DAM) N/A 1.5 0.50 March 7, 2022
Viridi Bitcoin Miners (RIGZ) -66.3% 6.5 0.90 July 20, 2021
Blockchain/crypto equity (active)
Amplify Transformational Data Sharing (BLOK) -47.0% 576.7 0.71 Jan. 16, 2018
ARK Next Generation Internet (ARKW) -56.9% 1,472 0.83 Sept. 29, 2014
Sources: IBD, S&P Global Market Intelligence, VettiFi