VanEck Digital Transformation ETF SHORTYear-to-date, bitcoin prices are up 72.7%, and crypto ETFs like the Valkyrie Bitcoin Miners ETF (WGMI C+) are also impressively up 128.9%. WMGI is currently the highest performing equity ETF YTD, while the remaining top 10 ETFs are all also crypto-related ETFs. This outperformance has been catching investor interest, but flows haven’t been matching up. WGMI has only $5.7 million net inflows this year, which places it at 647 out of 1,969 equity ETFs — just barely in the top third.
Some investors may still be reluctant to invest in crypto despite bitcoin prices rising back to near the $30,000 level, while some long-term crypto fans are still adding to their crypto allocations. Even for those that aren’t huge believers in the crypto industry, crypto ETFs can be a simple, familiar way to invest in a high-reward/high-risk portion of a market — which may fit into many investor portfolios in small allocations of 1%–5%. This note looks at a brief history of crypto ETFs, including what ETFs are currently available, while explaining some of the key differences between the different types of crypto ETFs.
What Crypto ETFs Currently Exist?
Before I describe the different types of crypto ETFs, it is useful to look at the crypto ETF industry timeline.
The Ark Next Generation Internet ETF (ARKW C+), which holds the Grayscale Bitcoin Trust (GBTC) and Coinbase Global (COIN) as its largest holdings, can be traced back to its inception in September 2014. Back then, the ETF was called the ARK Web x.0 with top holdings like LinkedIn (eventually acquired by Microsoft (MSFT), Netflix (NFLX), and Amazon (AMZN).
True blockchain ETFs didn’t appear until a few years later in 2018. The Amplify Transformational Data Sharing ETF (BLOK B-) and the Siren Nasdaq NexGen Economy ETF (BLCN C) were the first blockchain ETFs to launch on January 17, 2018 (although BLOK was actually the first to file for registration). After a couple of more launches, things were relatively calm for several years, until 2021 when more unique products began to appear partly due to higher Bitcoin prices and more investor interest (see chart below).
The VanEck Digital Transformation ETF (DAPP C+) kicked off a new wave of launches in April 2021, but it wasn’t until May 2021 that the Bitwise Crypto Industry Innovators ETF (BITQ ) was launched as the first ETF with crypto in its name. Several other crypto equity ETFs appeared as bitcoin headed toward another peak. In October 2021, another significant milestone occurred — the ProShares Bitcoin Strategy ETF (BITO ) was launched, which was the first futures-based ETF. This was followed by other futures-based bitcoin ETFs like the Valkyrie Bitcoin Strategy ETF (BTF ) and the VanEck Strategy ETF (XBTF ). The ProShares Short Bitcoin Strategy ETF (BITI ), which is the first and only inverse futures bitcoin ETF was launched in June 2022.
Since then, only a few ETFs have launched — the latest was launched on September 30, 2022. In 4Q22, the crypto industry hit a rut with the collapse of FTX and bitcoin prices falling below $20,000. With lower prices and some investor reluctance, several ETFs have closed in 2023. The Viridi Bitcoin Miners ETF (RIGZ) closed on January 4, 2023, followed by the Volt Crypto Industry Revolution and Tech ETF (BTCR), which closed on January 17, and the VanEck Digital Assets Mining ETF (DAM), which closed on April 24. With the closures of RIGZ and DAM, WGMI is now the only bitcoin mining ETF in the U.S. Despite the number of closures, there are still around 25 crypto ETFs in the U.S. which serve various purposes and can provide investors with different options. A few of these types are listed below.
