- Investors are pondering whether crypto prices have fallen as far as they are going to.
- If you want to get crypto exposure without buying and storing digital coins, you can buy ETFs.
- An investing expert has picked out three of the most promising crypto ETFs in the market.
The crypto market has fallen dramatically from the highs of last November, when bitcoin hit $69,000 and ethereum reached $4,800.
With the former around $40,000 and the latter at $2,500, many investors will be wondering whether prices have dipped as far as they are going to go, or if there is another leg down.
Nobody can tell you the answer to this for certain, but buying an asset at close to a 50% discount to its recent highs has to be tempting many. Most other coins are down from their highs by far more than 50%.
If you are of the view that now is the time to add crypto exposure to your investment portfolio, but are not fully up to speed on how to buy and store coins, or simply don’t want to, you might be pleased to know you can do it through your stock brokerage account.
A raft of exchange-traded funds offering crypto exposure now exist. ETFs can be bought and sold just like stocks. They are synthetic financial instruments whose value is pegged to a particular asset or index of assets, and they issue shares just like a company. They are already commonplace in portfolios as a way to get exposure to major indices like the S&P 500 or the FTSE 100.
“Cryptocurrency continues to catch the eye of many investors, with the demand for digital currencies growing significantly year on year,” noted Maxim Manturov, head of investment advice at online broker Freedom Finance Europe.
“As part of this trend, crypto exchange-traded funds are soaring in popularity amongst investors, by making it as easy to invest in bitcoin as it is to buy popular stocks. On top of this, rather than attempting to pick a high-earning crypto yourself, an ETF offers exposure to a basket of different cryptos and provides easier access to the world of cryptocurrency,” he said.
Much like a standard ETF, a crypto ETF tracks the price of one or more digital tokens, rather than tracking an index or basket of assets. Investors can learn how bitcoin works, without having exposure to its volatile price swings.
“Many investors are interested in crypto ETFs due to the benefits they bring at relatively low effort. Whether that be flexibility with trading, diversifying your portfolio, or lower cost of ownership, ETFs are a simple and easy way of gaining exposure to bitcoin,” Manturov said.
If you are interested in taking the plunge into blockchain-related ETFs but don’t know exactly where to start, Manturov has picked out three of the most promising options on the market, and taken a close look at the technicals for each one.
The Siren Nasdaq NexGen Economy ETF (BLCN)
“This is one of the first ETFs to focus on blockchain technology,” he said. “With assets under management (AUM) at £142.5m ($185m), the fund tracks an index of global companies committed to blockchain development. Although the index committee is not active, it has broad authority in selecting companies.”
“The main criterion used to evaluate a company is the level of material resources it has committed to researching, developing, supporting, and expanding the use of blockchain technology. It appears that distributed ledger technology, the blockchain, will play a central role in the economic transactions of the future. Given the recent weakness amid a general market correction, BLCN shares could be an interesting buy after breaking resistance of £27.3, in which case a move towards £34.95 is likely, making the growth potential 28.0%.”
Amplify Transformational Data Sharing ETF (BLOK)
“This ETF is an actively managed portfolio, mainly composed of global blockchain-focused stocks,” Manturov said. “With assets under management (AUM) at £671.6m, BLOK seeks to invest in companies developing or using what it calls “transformational data sharing technologies”, primarily focusing on blockchain technology.”
“Blockchain, the technology that drives bitcoin, is a distributed peer-to-peer ledger that facilitates transaction recording and asset tracking in the business environment. The growing blockchain ecosystem is a rapidly changing environment that includes many different industries because of the large number of applications.”
This relatively young market has great growth potential as the number of users increases and developers continue to create the so-called new Internet. Should it break resistance at £24.2, a growth of 34.4% is likely, changing the levels towards £32.52.
ProShares Bitcoin Strategy ETF (BITO)
“This one provides access to bitcoin (BTC) dynamics in an ETF shell,” Manturov continued. “The fund does not invest directly in bitcoin, but invests in bitcoin futures, this is worth keeping in mind as there may be some lag in the price of bitcoin.”
“Bitcoin futures are traded in contango, which means that the next month’s price is higher than previous months. Every time the fund sells futures contracts closer to expiration, it sells the cheaper contract to buy the more expensive one. This process affects the fund’s net asset value (NAV), which causes it to lag slightly behind spot bitcoin. Nevertheless, this ETF is the most affordable way to have exposure to bitcoin via stock market instruments.
“Overall, BTC dynamics have been good lately, on the back of rising demand, BITO stock could be interesting to buy after breaking resistance at £18.5, the growth potential of 36.3% is possible, making a new price of £25.22.”
