Top 5 Cryptocurrency ETFs to Buy GBTC is a closed-end fund at the moment, which means that it occasionally trades above or below its net asset value (NAV). Investors should normally avoid this. Open-ended ETFs, however, do not have this issue. So far, dreams for a spot Bitcoin (BTC) ETF listed in the United States have been shattered. Nevertheless, US investors can use a number of ETFs to increase their exposure to the cryptocurrency market in a standard brokerage account without the requirement for a cryptocurrency exchange or self-custody. The top seven bitcoin ETFs to purchase in 2022 are listed below.
Bitcoin Strategy ETF from ProShares (ticker: BITO)
There is a sizable secondary derivatives market for cryptocurrencies. Derivatives like futures are frequently used by traders to speculate or manage risk. BITO, which mimics the spot price of Bitcoin using Bitcoin futures contracts, is a perfect illustration of this. The difference, known as a “tracking error,” is how precisely futures contracts match the market price in some cases.
However, BITO has done a fantastic job of following the price of Bitcoin since its start. BITO has decreased by 56.7% year-to-date, almost matching Bitcoin’s decline of 56.1%. The disparity is probably brought on by BITO’s fees. The cost ratio for BITO is 0.95%, which equates to around $95 in yearly expenses for a $10,000 investment.
Grayscale Bitcoin Trust (GBTC)
GBTC is not officially an ETF, as was previously mentioned. The fund, however, trades on exchanges and is simple to acquire through most brokerages. The fund does follow the market price of Bitcoin, which means that it keeps real money in so-called “cold storage,” or offline wallets with a custodian. The ETF currently has $12 billion in AUM, or assets under management.
As per a recent check, each share of GBTC is equivalent to around 0.00091748 Bitcoin. However, depending on demand patterns, the closed-ended nature of GBTC may cause its market price to trade at a premium or discount to its net asset value. Due to several extensive liquidations in the months before, the fund is currently trading at a 36% discount to NAV. This is something that investors should be aware of and double-check before doing. Additionally, the expenditure ratio for GBTC is fairly high at 2%.
Global X Blockchain ETF (BKCH)
A well-known supplier of themed ETFs is Global X. One of its more intriguing funds monitors 24 blockchain-related businesses engaged in the creation, mining, promotion, and improvement of bitcoin technology. Riot Blockchain Inc. (RIOT) and Coinbase Global Inc. are notable stakes (COIN). BKCH provides strong proxy exposure even if it is not a pure-play bitcoin ETF. The ETF and Bitcoin price now have a 0.9 connection.
Similar to purchasing a gold miner ETF to increase exposure to gold equities, purchasing BKCH will provide you exposure to the cryptocurrency market. BKCH has a better connection with the stock market since it still consists primarily of equities. The expense ratio for the ETF is 0.5%.
Global X Blockchain & Bitcoin Strategy ETF (BITS)
BITS, another bitcoin ETF from Global X, has BKCH as one of its top five underlying holdings. Similar to BITO, the ETF then uses its remaining 50% as cash collateral for a variety of Bitcoin futures contracts. BITS provides investors with a hybrid strategy to exposure to cryptocurrencies by owning an equal amount of equity and Bitcoin futures. Due to its equity proportion, BITS may appeal to investors who are not at ease owning an ETF that is solely based on derivatives, like BITO. On the other hand, investors looking for a futures allocation that tracks the Bitcoin spot price more precisely may use BITS. The expense ratio for the ETF is 0.65%.
Purpose Bitcoin Yield ETF (BTCY.U)
Bitcoin is incredibly erratic, sometimes seeing intraday or overnight movements of 10% or more. A covered call ETF like BTCY.U, which owns a portfolio of Bitcoin and then sells a type of option known as a covered call on its holdings, is a terrific opportunity to take advantage of this volatility and turn it into high-yield income. The ETF receives a premium in exchange for this, which is then turned into revenue for the ETF. The larger this income, the greater the volatility BTCY.U now yields 16.1%.
The covered call’s drawback is that it may be exercised during bull markets if the price of Bitcoin surges far above its strike price, capping BTCY’s profits. U. In essence, the fund trades present income for its potential upside in the future, which may appeal to yield-hungry investors. The expense ratio for the ETF is 1.28%.
