Crypto ETFs & Blockchain ETFs
Cryptocurrencies and blockchains are trending topics in technology and finance at the moment. They have opened the door to unprecedented business and technological possibilities. Anyone who invests wisely in them will reap substantial benefits in the future. And any investor can take part in the process through blockchain and cryptocurrency exchange-traded funds (ETFs).
Investing in crypto and blockchain requires technological knowledge, expertise, and market insights. You must invest a tremendous amount of time and effort if you are a sole investor. Therefore, the most affordable option is pooled investments like a crypto or blockchain ETF. But which is the best crypto ETF? And how do these things work? Find out in the following discussion.
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Table of Content
What Is a Crypto ETF?
A Crypto ETF is an Exchange Traded Fund that includes one or more cryptocurrencies. When you invest in such a fund, you can earn from the price differences of the cryptocurrencies in multiple markets.
Crypto ETFs were introduced to the world in October 2021. The ProShares Bitcoin Strategy ETF was the first crypto ETF. This crypto ETF tracks the future prices of Bitcoin. Since then, many other companies have offered the opportunity to invest in crypto ETFs.
There are many reasons why investors look forward to crypto ETFs. A significant one is that you can gain ownership of cryptocurrencies and benefit from trading them at a much lower cost.
Plus, many investors are not well-versed in the literature on crypto and blockchain. For them, crypto ETFs provide the opportunity to invest in blockchain-based assets without going through the tedious research process.
Regular ETFs and crypto ETFs
Before getting into crypto ETFs, you must fully understand what an ETF is. An ETF or Exchange Traded Fund is a pooled investment. Here, investors put their money into a basket of assets, like bonds, contracts, or gold. Unlike mutual funds, you can buy and sell ETFs throughout the day on the stock exchange.
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Your profit from investing in an ETF depends on the difference between the prices of assets in different markets. From that aspect, an ETF almost sounds like a CFD or Contract For Difference.
However, ETFs are more popular and profitable. With ETFs, you can buy the product outright instead of holding a derivative position. Therefore, ETFs are ideal for long-term investments.
Similarly, when you invest in a crypto ETF, you invest in a basket of crypto-based assets. Essentially, these assets are cryptocurrencies. Although, with the advancements in blockchain technology, you may soon see the inclusion of other assets.
How Do Crypto ETFs Work?
An ETF targets a market and tries to earn a similar return. Therefore, it replicates the market or tracks the index. Crypto ETFs work the same way. But instead of a basket of assets, a crypto ETF will follow one or more digital token prices. When multiple digital tokens are involved, it is known as a crypto basket ETF.
Like any other stock market-associated investment, you should expect a regular rise and fall in prices with ETFs. And in the case of a volatile asset like cryptocurrency, these fluctuations might be more pronounced.
Why Crypto ETFs May be a Better Option than Buying Cryptocurrencies
Most investors do not understand blockchain-based technologies and investment opportunities well. This is why they were either missing those opportunities or were facing terrible losses from their crypto investments. This is where crypto ETFs come in to save the day.
So, crypto ETFs are better options for less experienced investors than cryptocurrency, as the issuer of the ETF has already taken care of the research and learning on their behalf. As a result, their cryptocurrency investment becomes less risky.
Affordable and Safe Crypto Investment
Cryptocurrencies, like Bitcoin and other well-known coins, are very expensive. As a result, they are almost out of reach for the average investor. For instance, the much-desired Bitcoin costs around $30,000 per coin on an average day. However, depending on the global political and financial situation, sometimes this price can reach as high as $63,000.
So, even buying one Bitcoin can cost you a fortune. And for the beginner and crypto naive investor, that can be a significant risk. In this case, a crypto ETF is a safe and affordable option. For instance, a Bitcoin ETF (an ETF that tracks Bitcoin prices) will sell shares for six to ten dollars, or within that range. So, you still get to invest in these fast-rising assets while staying within your affordability range.Â
Bypass Associated Charges
Owning cryptocurrencies itself is a costly process. For example, hidden expenses like transaction fees and network charges are unavoidable. Other costs include custody charges, digital wallets’ annual fees, and more. All these can add up to an overwhelming yearly expense.
But when you invest in a crypto ETF, you can easily avoid these costs because these fees and charges will be outsourced. So, the ETF providers will pay these expenses. As a result, you get the advantages of trading in cryptocurrencies minus the fees.
Outsourcing the Knowledge
Like the fees and costs, you can also outsource crypto knowledge when you invest in crypto ETFs. In other words, if you aren’t well-versed in the details of blockchains, cryptocurrency, and the countless technical terms associated with this new world, you can still participate in the financial process and make a profit.
In contrast, if you choose to purchase cryptocurrency individually, you must have at least minimal knowledge of crypto exchanges, the names of the coins and their position in the market, and the basics of blockchain technology. Part-time investors don’t have all this time. So, investing in a crypto basket ETF is easier and more manageable than putting their money in coins directly.Â
Security Concerns
All digital assets and systems are vulnerable to hacking. No matter how many security measures you take, some smart hacker will find a way to bypass them. And this applies in the case of cryptocurrency too. As you may know, cryptocurrencies have faced multiple cyber attacks since the beginning of their journey.
Maintaining a proper security standard can be extremely difficult if you are a lone investor in cryptocurrency because there are multiple ways a hacker can attack. In contrast, when you invest in an ETF, these things don’t concern you because the ETF providers will be responsible for the security.
Ease of Trading
The number of cryptocurrencies is ever-increasing. As of this article’s writing, there are nearly 2,000 cryptocurrencies available for trading. So, if you want to do business in that world, you must constantly monitor and keep yourself updated on the current developments of these assets.
Doing so is difficult enough for a person whose primary profession is crypto investing, making it near impossible for amateurs.
Here a crypto basket ETF provides a solution. When you invest in such an asset basket, the ETF provider will oversee all the market monitoring. Meanwhile, you can invest in multiple potential assets from your comfort zone.
Best Crypto ETFs to Buy in 2022
Now that you know how convenient and profitable crypto ETFs are, you might be planning an investment. However, since their introduction in 2021, multiple companies have been offering investors this opportunity. Which is the best crypto ETF? Let’s review some of the top crypto ETFs on the market to help you decide.
1. ProShares’ Bitcoin ETF
ProShares’ crypto ETF project is called ProShares Bitcoin Strategy ETF. It started on October 19, 2021 and became a massive hit within days of its launch. Just after two days, this crypto ETF amassed around one billion dollars.
This project is a Bitcoin ETF and uses the BITO symbol for trading purposes. It tracks the price developments of Bitcoin.
When you invest in ProShare, you won’t purchase a futures contract. Instead, you will get a share of your investment. ProShares will collect money from similar shareholders and pool it together into a fund that they will invest in the future. ProShares will later pay their shareholders profits on their respective shares depending on the market situation.
2. BITW
BITW stands for BitWise Ten Crypto Index Fund. It is probably the best crypto basket ETF out there. While most crypto ETFs only track Bitcoin, BITW extends its focus to other currencies. As per the name, it bundles together ten cryptocurrencies depending on the current market positions of the assets.
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So, for average investors who want to put money in multiple cryptocurrencies with future potential, BITW is the right ETF for you. However, you must deal with a K-1 form when the year ends. That’s because your participation in this fund will be regarded as a partnership and this can make your income tax situation more complicated than usual.
3. Grayscale Bitcoin ETF
Grayscale is a subsidiary of DCG or Digital Currency Group. DCG is the venture fund that created the hugely successful Cryptokitties. Plus, they are part of many other well-known crypto and blockchain-related projects, such as Coinbase and Coindesk. So, a crypto ETF from them indeed promises a lot.
Greyscale ETF will also track the developments of Bitcoin. However, it won’t invest in Bitcoin futures. Instead, its investments will be in spot ETF. In other words, the Greyscale ETF will hold and trade real Bitcoins and offer shares to investors on that basis.
Here, the main attraction is Bitcoin settlements at the contract’s expiration. In comparison, other crypto ETFs will settle in cash. So, invest in Greyscale if you have been looking forward to owning some Bitcoins but can’t afford them.
4. Valkyrie’s Bitcoin ETF
Another great crypto ETF is Valkyrie’s Bitcoin ETF. This ETF also tracks the development of Bitcoin prices, a trend you will see with the most popular ETFs. That’s because Bitcoin is the hottest cryptocurrency with the most future potential and it’s too expensive for ordinary people.
Valkyrie’s ETF also started its journey in 2021. The symbol used for trading is BTF. Unlike BITO, BTF does not make direct investments in Bitcoin. Instead, they invest in Bitcoin futures via a subsidiary company.
The ETF aims to buy these future contracts that will accumulate a value equal to its total assets. After that, it will offer shares to the fund’s investors. Investors can then buy or sell these shares on the market. This way, investors can protect themselves from the heat of direct involvement in Bitcoin Futures.
5. VanEck
If you seek the cheapest option in Bitcoin ETFs, then VanEck is the one. With an expense ratio of only 0.65 percent and no performance fee, this is undoubtedly suitable for investors who do not want to bear extra costs.
Similar to other crypto ETFs, you can buy shares of the fund and buy and sell them on the Chicago Board Options Exchange. Currently, VanEck manages assets worth around 28 million dollars and the share prices are approximately 43 dollars.
What Is a Blockchain ETF?
A blockchain ETF is a pooled fund that invests exclusively in companies closely related to blockchain technology. For instance, these companies might use a blockchain to run their primary business operations, or they might be making their profit from the blockchain. It is similar to the sector-based ETFs in physical finance.
In contrast to a crypto ETF or crypto basket ETF, blockchain ETFs do not focus on crypto assets. Instead, they are putting their money on companies that will depend significantly on the blockchain for their business operations. So, it is understandable that these companies or their functions are highly futuristic and have significant growth potential.
While most crypto ETFs are relatively new and are still seeking approval from the Securities and Exchange Commission, while blockchain ETFs have higher incidences of approval. Therefore, investing in blockchain ETFs is much easier compared to crypto ETFs.
Also, consider the difference between the underlying entities. For instance, crypto coins are highly volatile assets, so investing in them always poses a significant risk, no matter how strategically you do it.
On the other hand, the growth of blockchain technology is almost a sure thing. Therefore, the companies looking to build a business on it have a well-calculated possibility of success. So, investing in these companies’ shares is unlikely to go wrong.
However, investing in blockchain ETFs means putting your money in tech-based startup companies. While blockchain technology will continue its glorious journey in the coming years, the same isn’t necessarily true for a startup that bases its business on it. There might be a lot of other issues that can bring a budding business down. So, that’s something to consider before investing in startups.
What Is Invesco Elwood Global Blockchain UCITS ETF?
The Invesco Elwood global blockchain UCITS ETF is a blockchain ETF that collects funds from average investors and invests them in a pool of blockchain-based company shares. This blockchain ETF aims to make profits for the general investors from the future growth of potential blockchain-associated businesses.
What Does Invesco Elwood Global Blockchain UCITS ETF Do?
As mentioned earlier, blockchain ETFs can be an extremely profitable investment if done correctly. It is clear today that in the future lists of billionaires, the top positions will be held by people who invested in blockchain and metaverse at the correct hour. However, the challenge lies in identifying the startups with true potential.
This is where Invesco Elwood Global Blockchain UCITS ETF comes in. Often, the potential of a startup isn’t readily visible. And this is more complicated in the case of blockchain-based companies because most investors lack the proper knowledge and insights to judge these businesses. With Invesco Elwood Global Blockchain UCITS ETF, you can outsource these tasks to the blockchain ETF providers.Â
Companies like this focus on including developers of hardware for crypto mining. Blockchain-based energy and token investments are other budding sectors. So, Invesco Elwood includes them in the pool too. It is interested in businesses that provide solutions and consultation regarding blockchain technology.
What Sets Invesco Elwood Global Blockchain UCITS ETF Apart?
The Invesco Elwood Global Blockchain UCITS ETF tracks the Elwood Blockchain Global Equity Index. The investment firm that builds this index is an expert in blockchain technology and its related assets. In other words, when investing in this blockchain ETF, you can make informed and knowledgeable financial decisions.
Another essential quality of a blockchain ETF is the willingness to evolve, as blockchain is a relatively new technology with unknown potential and it might not look and function the same way as it does today. Invesco Elwood Global Blockchain UCITS ETF is designed to keep pace with these changes.
Analysis of Past Performance of Invesco Elwood Global Blockchain UCITS ETF
Invesco Elwood Global Blockchain UCITS ETF has given an excellent performance in the recent past. Their managed assets have gone through explosive growth and crossed the mark of $800 million. This success lies in the blockchain ETFs smart and well-calculated choice of investing in an industry experiencing steady and fast development.
This performance has, of course, made many new investors interested in the blockchain ETF. This is why the fund has received positive monthly inflows for the past year. This resulted in a total of $440 million in new assets. In this flow, only January and February saw a net incoming of $226 million.
The reasons for this success include the popularity of blockchain technology itself. Every day, more businesses are discovering the merits of blockchain for their operations. Plus, startups are finding rapid success and quickly returning rewards to their initial investors.
Should I Buy Invesco Elwood Global Blockchain UCITS ETF?
Yes, you should buy Invesco Elwood Global Blockchain UCITS ETF if you are considering investing your money in emerging blockchain-based companies. Invesco identifies the startups with true and hidden potential on your behalf. Plus, the index they track was built by some of the best experts in the field. Here are a few of the reasons for investing in this blockchain ETF.
Best-positioned companies: Most blockchain ETFs will only contain companies openly advertising their affiliation with blockchain. However, there are many businesses that will benefit immensely when the blockchain revolution unfolds, although might not seem to have much to do with the technology at the moment. Elwood blockchain ETF includes these companies in the pool too.
Global monitoring: Some blockchain-based companies and startups have obvious future potential that you can identify. However, you can’t know or keep track of all the businesses that keep popping up all over this fast-moving world. So, Elwood Invesco does this for you, and you do not miss out on any investment opportunity.
A Unique Index: Elwood asset management is behind the construction of the index for this blockchain ETF. Now, Elwood is one of the leading experts in the field of blockchain technology and they have enriched this index with their insights and designs.
Different sectors: Invesco Elwood Global Blockchain UCITS ETF’s investment pool consists of shares from various companies. As blockchain technology has been finding its use across multiple sectors, this blockchain ETF has extended its investment focus.
Scoring system: Invesco Elwood Global Blockchain UCITS ETF scores the companies on a scale of one to five. A company scoring five (“core”) is currently involved in blockchain business activities. In comparison, those that score one (“potential”) are not presently conducting such activities. However, they do have the resources and expertise to do so.
Savings Plan Offers for Cryptocurrency ETFs
When investing in crypto ETFs, you want to cut down on costs wherever possible. To do that, you need a good savings plan. Some of the best savings plans can help you save up to $500 on your crypto ETF investment. Scalable, Flatex, and Ing are some of the best saving plans for crypto ETFs.
Scalable: With Scalable, you can invest at a low cost and minimum amounts. This broker helps you save in more than 2,000 ETFs at zero cost. Plus, there are zero-dollar savings plans for all the ETFs. You can start investing with a savings rate as small as one euro.
Flatex: This savings plan for crypto ETFs lets you invest freely without custody fees. You also don’t have to deal with the usual market spreads and product costs.
Ing: You can open a direct depot with Ing. The savings plan for crypto ETFs starts as low as one euro. Plus, over 800 ETF savings plans here have a permanent discount.
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Conclusion
Crypto ETFs and blockchain ETFs are two of the best opportunities for the average investor interested in this new sector. You may not have a lot of investing capability, time, and knowledge that is otherwise required to be a professional investor in crypto and blockchain, but these ETFs let you have a piece of the pie within your affordability range.
When investing in blockchain businesses and projects, it is advisable that you know what you are putting your money into. So, the ideal thing to do is invest in a well-known crypto ETF, like the ones mentioned on the list. Invesco Elwood Global Blockchain UCITS ETF can be a safe and rewarding choice.
