What is a Cryptocurrency ETF?
A cryptocurrency ETF is an investment fund that holds assets such as bitcoin and other digital currencies and tracks an underlying index. Cryptocurrency ETFs are traded on exchanges and can be bought and sold like other stocks.
The first cryptocurrency ETF was launched in Canada in February 2018, but the U.S. Securities and Exchange Commission (SEC) has yet to approve any such products for trading on American exchanges. The SEC is concerned about the potential manipulation of cryptocurrency markets, as well as the lack of regulation of exchanges where digital currencies are traded.
Investing In Cryptocurrency ETFs
Cryptocurrency ETFs would give investors exposure to the digital currency market without having to buy or store any actual bitcoins or other tokens. And because ETFs trade on exchanges, they would provide greater liquidity than some existing digital currency investment products such as mutual funds.
if you want to invest in ETFs that hold digital currencies, you may have to wait until the SEC approves such products for trading on American exchanges. In the meantime, you can invest in bitcoin and other digital currencies through several different methods, including online exchanges and wallets, mining pools, and cloud mining contracts.
But there are also risks associated with investing in a cryptocurrency ETF. For one thing, the value of cryptocurrencies can be extremely volatile—in the first two months of 2018, for example, the price of bitcoin fell by more than 50%. And because most digital currencies are not regulated by governments, there may be little recourse for investors if something goes wrong.
Evaluating a Cryptocurrency ETF
Before investing in a cryptocurrency ETF, you’ll want to evaluate the fund to make sure it meets your investment objectives. Here are some things to look for:
- The fund’s investment objective and strategy. Make sure the ETF’s investment objective and strategy align with your goals.
- The fund’s fees. All ETFs charge fees, and you’ll want to compare the expense ratios of different funds to find one that’s reasonably priced.
- The fund’s holdings. Take a look at the ETF’s portfolio to see what types of assets it holds and how those assets are weighted.
- The fund’s performance. Look at the ETF’s historical performance to get an idea of how it has performed in different market conditions.
- The fund’s risk level. Be sure to understand the risks associated with investing in a cryptocurrency ETF before you invest.
Once you’ve evaluated a fund, you can decide whether or not to invest. If you do decide to invest, be sure to monitor the fund regularly to make sure it continues to meet your investment objectives.
7 Best Cryptocurrency ETFs by Performance 2022
1. Bitwise 10 Large Cap Crypto Index Fund (BITW)
2. Amplify Transformational Data Sharing ETF (BLOK)
3. First Trust Index Based Crypto Asset Fund (LEGR)
4. Reality Shares Nasdaq NexGen Economy China ETF (BCNA)
5. Amplify BlackSwan Growth & Treasury Core ETF (SWAN)
6. Motley Fool 100 Index ETF (TMFC)
7. Global X Internet of Things ETF (SNSR)
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Investors should carefully consider these and other risks before investing in a cryptocurrency ETF. And although the SEC has yet to approve any such products for trading in the United States, it’s possible that approval could come soon—in which case, ETFs could provide a way for investors to get exposure to this burgeoning asset class without having to hold any actual bitcoins or other tokens