With 2021 nearly in the books, it’s accurate to say to it’s been another banner year on the new exchange traded funds front. More than 400 ETFs came to market this year, easily shattering the previous record set just last year.
In this year’s bumper crop of new funds are an array of crypto ETFs. Some nibble at bitcoin in direct fashion, albeit via futures not through spot exposure. Additionally, many crypto ETFs, including those in the rookie camp, get investors into the game through stocks. All this while data confirm interest in crypto ETFs is increasing.
“Even beyond the launch of the first U.S. Bitcoin futures ETF, cryptocurrency funds notched some notable global milestones in 2021,” according to a Bloomberg article. “The number of crypto-tracking investment vehicles worldwide more than doubled to 80 from just 35 at the end of 2020, according to Bloomberg Intelligence data. Assets soared to $63 billion, compared to $24 billion at the start of the year.”
What’s mentioned above is encouraging. Of course, without a crystal ball, no one knows how bitcoin and other digital assets will perform in the new year. If the largest digital asset cooperates, 2022 could be exciting for the following crypto ETFs.
VanEck Digital Transformation ETF (DAPP)
The VanEck Digital Transformation ETF (DAPP) debuted in April and as an equity-based crypto ETF and while it holds just 25 stocks, it provides surprising depth to a still emerging asset class. For investors wary of bitcoin volatility or those new to digital assets, DAPP is an efficient, perhaps reserved way to get involved.
“Digital asset companies also generate cash flows related to their various business lines, while the vast majority of cryptocurrencies do not generate cash flows. For a user to make a profit on a bitcoin trade, the user has to sell bitcoin at a higher price than what it was bought for, which is not the same as a business-related cash flow,” says VanEck analyst Meghana Pakala. “Companies are also currently regulated, so investors can gain access to digital asset disruption in the known format of a traditional equity ETF wrapper.”
DAPP’s “secret sauce” is crypto-correlated stocks, which include miners, exchange operators and digital infrastructure companies. Familiar names on the DAPP roster include include Coinbase (COIN), Marathon Digital Holdings (MARA), and Block (SQ), the company formerly known as Square.
Invesco Galaxy Crypto Economy ETF (SATO)
The Invesco Galaxy Crypto Economy ETF (SATO) is even new kid on the crypto ETF block having debuted in October. SATO follows the Alerian Galaxy Global Cryptocurrency-Focused Blockchain Equity, Trusts and ETPs Index and blends equities with the Grayscale Bitcoin Trust (GBTC) – an index fund providing physical bitcoin exposure.
SATO is a play on increasing adoption of digital assets as well the reduced correlations these assets often sport to equities and bonds. Those are signs SATO could have a receptive audience of investors in front of it.
“Well-known companies, such as Tesla and PayPal, and governments throughout the world continue to explore the benefits of leveraging cryptocurrencies and blockchain technology to improve their operations. That’s one important way many investors believe that digital assets can play a role in diversified portfolios as adoption may grow,” according to Invesco research.
Siren Nasdaq NexGen Economy ETF (BLCN)
The Siren Nasdaq NexGen Economy ETF (BLCN), which tracks the Siren Nasdaq Blockchain Economy Index, is one of the oldest ETFs in this category and as its name implies, emphasizes blockchain equities – a crypto-correlated group to be sure.
BLCN “invests in the companies that are developing this truly innovative and transformational blockchain technology,” according to the issuer. “The blockchain ecosystem potentially presents one of the most profound, long-term investment opportunities in the market today. Furthermore, blockchain is still in its infancy, and we are confident it will have far-reaching, disruptive effects in nearly every industry.”
The $264 million ETF holds 63 stocks, many of which have direct or growing crypto exposure. Interestingly, BLCN is less volatile on an annualized basis over the past three years than the S&P 500 Technology Index.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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