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An ETF, or exchange-traded fund, is a collection of similar investments that people can buy. ETFs create a diversified portfolio without the investor having to choose from a multitude of stocks. Similarly, Bitcoin ETFs are collections of Bitcoin-related investments. If you would like to get into crypto investing but feel investing in Bitcoin or alt-coins carries too much risk — or you don’t want to worry about finding the best places to store your crypto — investing in a Bitcoin ETF could be for you.
An article by Forbes points out that Bitcoin ETFs currently do not include Bitcoin, but, instead, hold Bitcoin futures contracts or stocks of companies related to Bitcoin and other crypto. For instance, a Bitcoin ETF may include the stock of a crypto exchange, the manufacturer of cold wallets, or — more commonly in the case of the best Bitcoin ETFS — Bitcoin futures.
What Are Bitcoin Futures?
Futures represent a legal agreement to purchase or sell a specific commodity at a predetermined price at a specific time. When you purchase Bitcoin futures, you are agreeing to purchase Bitcoin. Keep in mind, when you trade in futures, you sell the commodity before it ever reaches your hands. You don’t have to worry about selecting a crypto exchange or purchasing a cold wallet for secure storage. You won’t actually hold Bitcoin.
The Securities and Exchange Commission will not permit ETFs to hold Bitcoin or other crypto, since crypto is traded on non-regulated exchanges. Futures, on the other hand, are regulated by the SEC. Many advanced investors are familiar and comfortable with futures, so these ETFs are growing rapidly as an alternative to Bitcoin trading.
Best Bitcoin ETFs
The SEC has currently approved six Bitcoin ETFs for trading, according to Forbes. While we are calling these the best Bitcoin ETFs to buy in 2022, they are also the only ones available — at least, for now.
ProShares Bitcoin Strategy ETF
ProShares was the first Bitcoin ETF to hit the market, back in October 2021. It garnered $1 billion in growth in its first few days. The ETF has fallen dramatically since its launch, in line with the crypto winter that saw Bitcoin lose 70% of it’s all-time high value. The crypto has plummeted from $68,000 on Nov. 10, 2021 to less than $20,000 on Aug. 31, 2022.
Likewise, Proshares (BITO) is down 70% from its launch. You’ll find similar bearish numbers with all the ETFs on this list. The crypto winter could represent a time to buy. As investor and author Robert Kiyosaki tweeted at the start of the crypto crash of 2022, “Crashes are the best time to get rich.”
In addition to Bitcoin futures, the ProShares BITO ETF holds Treasury securities and cash, according to Forbes, which provides some diversity and a hedge against the crypto winter. The ETF is currently trading at just under $12 per share, which could provide an opportunity to take a position without a huge investment.
ProShares Short Bitcoin ETF
If you are bearish about Bitcoin and believe the current crypto winter will drag on, with no rebound in sight, you might consider ProShares Short Bitcoin ETF (BITI). Unlike the other ETFs on this list, the ProShares Short Bitcoin ETF is speculating on a further decrease in the price of Bitcoin. It launched in June 2022, just ahead of the crypto winter and has begun to climb. With some experts stating that the crypto winter could end by 2023 or 2024, there is still time to get in on BITI.
Valkyrie Bitcoin Strategy ETF
Valkyrie trades almost exclusively in Bitcoin futures, and currently has $22 million in assets. Additionally assets could be made up of government securities, money market funds and corporate bonds. It does not deal in Bitcoin stocks or companies otherwise related to Bitcoin. For this reason, Valkyrie tracks closely to Bitcoin’s value but, the company warns, “investors seeking direct exposure to the price of Bitcoin should consider another investment.”
Part of the Nasdaq Composite, Valkyrie is an actively managed ETF listed as “non-diversified” under the Investment Company Act of 1940. It does hold a limited number of U.S. Treasury bills, but close to 100% of its net assets is tied up in Bitcoin futures. Valkyrie is trading at just $7.28 per share in early September. If you believe the crypto winter will, ultimately, pass, Valkyrie could be a solid investment to buy and hold.
VanEck Bitcoin Strategy ETF
Like Valkyrie, VanEck aims to hold most of its investments in Bitcoin futures, but may have some assets invested in Treasury bonds and cash. VanEck differs from the other investments on this list because it is managed as a C-Corp tax entity, rather than a registered investment corporation. That means it doesn’t have to distribute dividends to investors, which could mean lower taxable distributions. VanEck also manages a number of other stock- and futures-based ETFs, including VanEck Gaming, VanEck Environmental Services, VanEck Biotech, VanEck Video Gaming and eSports, and VanEck Digital Transformation. The company’s focus on emerging industries, sustainability and specialized exposures promises longevity. VanEck is one of several investment firms that has filed an application for a spot Bitcoin ETF, which would track the price of Bitcoin, rather than Bitcoin futures. The company’s innovative approach could make the VanEck Bitcoin Strategy ETF an enticing investment. It’s currently trading at a 52-week low of $18.15, which is still higher than some of the other ETFs on this list.
AdvisorShares Managed Bitcoin Strategy ETF
The actively managed AdvisorShares Managed Bitcoin Strategy ETF (CRYP) invests primarily in Bitcoin futures, with some government securities, cash and even affiliated ETFs as part of its portfolio. Depending on the price of Bitcoin, the fund can reduce or increase its Bitcoin futures exposure from zero to 100%. It only manages $184,000 in assets, and is the newest Bitcoin ETF to gain SEC approval. It reached the market in April 2022. Actively managed by Mark Yusko, CEO and Chief Investment Officer of Morgan Creek Capital Management, the fund reduces much of the risk related to Bitcoin futures, as well as the investment challenges associated with trading Bitcoin.
Global X Blockchain and Bitcoin Strategy ETF
Global X combines Bitcoin futures and blockchain stocks to create a more diversified portfolio than many of the other ETFs on this list. Specifically, Global X holds shares of the Global X Blockchain ETF, which focuses on blockchain development companies, crypto exchanges and digital mining companies. In August 2022, the company divided its $10 million in assets with 44% in Bitcoin futures and 56% in the Global X Blockchain ETF.
Global X’s experience with global exposure across multiple industries could make the ETF an enticing investment. It is currently trading close to its 52-week low, leaving plenty of room for growth.
Final Take
Bitcoin ETFs allow you to take advantage of a high-risk — and potentially high reward — asset without actively managing your portfolio. A Bitcoin ETF could be the right choice if you don’t want to mess with the technology behind trading Bitcoin and prefer a regulated investment.
You should speak to a financial advisor who can offer the guidance you need and help you add Bitcoin ETFs to your portfolio or begin an investment account.
FAQ
- Which Bitcoin ETF is best?
- During a crypto winter, your best Bitcoin ETF investment might be ProShares Short Bitcoin, BITI. However, any of the Bitcoin ETFs on these lists could provide a solid ROI once the crypto market rebounds. Consider the prices right now as a sale.
- Are Bitcoin ETFs a good investment?
- Bitcoin ETFs typically represent Bitcoin futures or companies with stakes in crypto. When you invest in futures, you are speculating on the future price of an investment — whether that’s grain, oil, or, in this case, crypto. Futures and ETFs are regulated by the SEC, while Bitcoin trading is not. Some investors may feel that makes Bitcoin ETFs a safer investment.
- Is it better to buy Bitcoin or Bitcoin ETFs?
- Neither investment is “better” than the other, per se. If you plan to use Bitcoin for purchases, or like the idea of deregulated finance, you may want to hold some Bitcoin. But if you’re more interested in diversifying your portfolio and profiting from another potential bull crypto market, and don’t necessarily want to trade crypto, a Bitcoin ETF is a good place to start.
Information is accurate as of Sept. 8, 2022.
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