Crypto-based exchange-traded funds (ETF) have emerged as an attractive investment option with the potential to unlock a significant capital inflow into the digital asset industry. Traditional finance players believe that the blockchain domain is yet to be fully explored and presents opportunities and risks that would impact the choice of investors due to the prevalence of greed and fear.
While the potential gains are enormous, the losses can be equally devastating, pushing leading players away from investing large sums of money into the crypto market. However, crypto ETFs represent one of the safest options for institutional players to explore the digital asset industry profitably.
With ETFs, investors can avoid bothering over the unstable price of Bitcoin (BTC) as ETFs serve as the middle-ground for them to enter the highly volatile sector. For the best crypto ETFs to invest in in 2023, this guide will analyze the top-performing funds to consider and why they may suit your investment preferences.
Crypto ETF Explained
Consider a Crypto ETF as a wise investment companion that tracks the price actions of crypto assets like Bitcoin and altcoins like Ethereum and Cardano. But the good news is that as an investor in these ETFs, you do not have to know how to operate digital wallets or purchase these digital coins through crypto exchanges or peer-to-peer before you benefit from your crypto investment.
Instead, buying crypto ETF shares is your first foray into profiting from the digital asset space. When you purchase these shares, you own a piece of the fund’s stash of cryptocurrency goodies.
More importantly, the managers of the ETF handle the acquisition, management, and sale of cryptocurrencies. Then, when it’s time to share profits, you receive yours as determined by the percentage of your investment.
Best Crypto ETFs To Consider
In no particular order, below are some of the best cryptocurrency ETFs to consider when exploring crypto investments using this route:
Grayscale Bitcoin Trust (GBTC)
The Grayscale Bitcoin Trust is among the most popular and actively traded cryptocurrency investment funds. While it is not entirely an ETF, it operates similarly by holding a large reserve of Bitcoin.
Enthusiasts can secure their stake by purchasing shares in the Trust; thus, they can benefit from the future uptrend price of Bitcoin or the underlying crypto asset. These shares are traded on the over-the-counter market, and the intrinsic price of Bitcoin and the complex market forces determine their value.
Amplify Transformational Data Sharing ETF (BLOK)
The Amplify Transformational Data Sharing ETF is a pioneer in the crypto world, opening doors to companies deeply involved in advancing blockchain technologies. However, the fund does not focus solely on cryptocurrencies but on the trailblazing businesses driving blockchain’s transformative potential.
Valkyrie Bitcoin Strategy ETF (BTF)
The Valkyrie Bitcoin Strategy ETF quickly rose to prominence in the crypto ETF arena since its inception in 2021. This hands-on fund employs a fluid strategy by allocating nearly all of its net assets to Bitcoin futures contracts.
Apart from Bitcoin derivatives, the residual assets are invested in US government securities, money market funds, and corporate bonds.
Pros
Ease of Use: Crypto ETFs are available on regular stock exchanges, providing a user-friendly entry point for most investors. The hassle of digital wallets and complicated cryptocurrency exchanges is no longer an issue.
Variety: Numerous Crypto ETFs offer a glimpse into various cryptocurrencies and crypto-linked enterprises, allowing you to spread your investments across diverse opportunities.
Expert guidance: Crypto ETFs are managed by skilled fund managers. Their expertise in monitoring the underlying crypto assets ensures your portfolio remains an investment, not a liability.
Cons
Costs: Crypto ETFs have management fees that may reduce your potential gains significantly. Generally, these fees are often higher than those associated with cryptocurrency exchanges.
Limited ownership: Investing in a Crypto ETF does not give you direct ownership of the core cryptocurrencies. As a result, you can’t use them for other purposes, such as participating in DeFi protocols.