Cryptocurrency ETFs are funds containing different kinds of cryptocurrencies. Just as traditional ETFs track a list of assets; crypto ETFs track the prices of different digital assets. Like regular stocks, they also trade daily; and their prices are influenced by investors’ actions, including sales and purchases.
A Cryptocurrency Exchange Traded Fund (ETF), grants investors the freedom to own a portfolio containing diverse assets or an entire class of assets. Investors can buy and sell ETFs on exchanges just like they do stocks, using conventional brokerage accounts.
According to Statista, ETFs make it easy for investors to diversify their portfolio. And their stock-like features make them easy to manage; whether for long or short-term investment purposes. Their lack of active management helps reduce their cost and other attached expenses.
How does it work?
Furthermore, ETFs are registered on exchanges like Nasdaq, New York Stock Exchange, etc, just like individual stocks. Their monetary value tends to go up and down during trading hours on the exchange floors. Unlike Mutual funds whose value prices are always revealed once a day; ETFs monitor the change in prices of assets, thus leading to the sales or purchase of some of its components.
Cryptocurrency ETFs serve as blankets that enable investors to own different crypto assets in one portfolio. ETFs help investors create a diversified portfolio containing different assets with one single investment.
Also, a major benefit of a Crypto ETF is that it lowers the ownership costs for acquiring cryptocurrencies by the investors. The investors are also shielded from learning the difficult procedures involved in Crypto trading as they outsource with ETFs.
Some available Cryptocurrency ETFs
The ever-increasing popularity and volatility of cryptocurrency keep attracting investors from all walks of life; from individuals looking for the next big coin, to institutions creating different crypto related products. 2021 saw about $33 billion from venture capitals invested into blockchain and crypto-related startups – according to Blockworks.
In addition, those who came in early into the Crypto industry have made a lot of money from their respective investments. But the fact is that the industry is still young, and there is still a lot of money there. Just like there are possibilities of massive gains, so are their potentials for huge losses.
This need for security in investments is why some people are calling for Crypto ETFs that deal directly in Cryptocurrencies. Though there are some Crypto ETFs that invest in companies whose activities are crypto or blockchain-related. Some of those ETFs include the following:
- Bitwise Crypto Industry Innovators ETF (BITQ)
- Siren Nasdaq NexGen Economy ETF
- Amplify Transformational Data Sharing ETF
- Global X Blockchain ETF (BKCH)
- First Trust Indxx Innovative Transaction & Process ETF (LEGR)
Why the SEC keeps rejecting them
Even though the US Security and Exchange Commission has over the years accepted some Futures Bitcoin ETFs; they are still showing their rejections to Spot Bitcoin ETFs – with the latest one being that of Grayscale Spot Bitcoin ETF.
The SEC approved the listing of the first Bitcoin Futures powered ETF by ProShares on the New York Stock Exchange in October 2021. The trading volume of about $1 Billion on the fund’s first day shows people’s interest in Crypto backed ETFs.
Justifying their rejection of the Skybridge Spot Bitcoin ETF, the SEC claims the fund doesn’t meet the requirements.
The Commission’s excuse for the continued rejection of most spot Bitcoin ETF is that – “they must be designed in a way that prevents fraudulent and manipulative acts and practices.
However, it seems there might be good news in sight as the SEC’s response to Grayscale’s proposal is that it is seeking public comments concerning the application. In response to this, Grayscale investments is launching a campaign that aims at educating and encouraging American investors to submit comments on its application with the SEC. And as a result, convince the SEC into approving its filing.