Those that have been following the developments unfolding in the crypto market over recent months might be aware of all the scrutiny the industry has received, as regulators and lawmakers are closing in on finding new alternatives to potentially regulate the gray area in which crypto is being traded.
Chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler has rebutted strong criticism for the crypto industry following the collapse of the global crypto exchange platform FTX in November last year.
More than this, Gensler and fellow SEC lawmakers have filed more than a dozen lawsuits against Binance, a leading cryptocurrency exchange, and its founder and chief executive, Changpeng Zhao.
On August 15, Binance publicly announced that it will shut down Binance Connect, considered to be the regulated buy-and-sell branch of the Binance exchange. The shutdown was scheduled for August 16,
This is not that surprising, seeing as the company has been faced with a slew of regulatory allegations in Australia, Germany, and the United Kingdom.
While all of this has been playing out, cryptocurrencies continue to see increased performance, as investor optimism began to fuel a market rebound following several months of bearish performance, led by the global coin, Bitcoin (BTC), dropping roughly 76% from its peak of $60,000 in November 2021 to November 2022.
With the tides starting to change, investors continue to rally behind the end of the crypto winter, as they prepare themselves for what could potentially be the next crypto bull run.
Three Crypto ETFs Investors Should Consider
With interest in spot crypto and blockchain ETFs garnering increasing attention and having widespread broker support, perhaps regulators could see the potential market capitalization these investment vehicles could hold for the long term.
Some analysts have touted the idea of bringing on board more spot crypto ETFs, such as in the case of a spot BTC ETF, which could potentially reach 10% of the total BTC market cap in the coming years.
With asset managers and brokers planting their support behind the potential of a spot BTC ETF, here’s a look at some crypto ETFs investors should be considering if they want to have a leg up in the race.
The ProShares Bitcoin Strategy ETF (NYSEARCA:BITO) is a BTC-linked exchange-traded fund that follows and tracks the performance of spot BTC.
The fund claims to be one of the first, and perhaps the largest BTC-link ETF available in the U.S. and is a liquid alternative for investors looking to have increased exposure to the crypto and digital assets marketplace.
BITO, similar to other crypto-based securities, started the year off on the low end of the spectrum, but on average, the fund has grown by 43.28% year-to-date. In mid-June, BITO jumped by 18.82%, after snapping a winning streak, and since then, price performance has remained relatively significant.
Looking at the funds’ performance indicators, Q2 2023 growth was up by 5.21%, while the fund gained 61.40% in a full year. Furthermore, the market price return of the ProShare BTC Strategy ETF gained 61.32% over one year.
The overall performance of the fund is nothing to get too excited about, other than the fact that it provides investors with a more diversified long-term approach to conventional currency investments, and seeking capital appreciation.
Looking at the Bitcoin price chart there could be a potential upside in the near future for BITO, with BTC already up more than 70% since the start of the year, and recording solid performance for both June and July, before prices slightly remained flat during the beginning of July.
Global X Blockchain ETF
The Global X Blockchain ETF (NASDAQ:BKCH) positions itself to benefit from wider blockchain technology adoption, diversifying its holdings in companies that are invested in developing digital assets, including blockchain products and services.
The fund has a broad asset allocation, with its top five biggest investments including Coinbase (NASDAQ:COIN), Marathon Digital (NASDAQ:MARA), Riot Platforms (NASDAQ:RIOT), HUT 8 Mining Corporation (NASDAQ:HUT), and Cleanspark (NASDAQ:CLSK).
Investors will find that the fund also holds PayPal (NASDAQ:PYPL), Nvidia (NASDAQ:NVDA), Argo Blockchain (ASX:ARG), and Overstock (NASDAQ:OSTK), among others. These companies have in more recent months positioned themselves as innovators of the blockchain industry, seeking to develop advanced blockchain tools and assets, accessible to the commercial marketplace.
Looking at the funds’ performance, overall year-to-date growth has escalated by 140.78%, while in the last three months, performance was up by 64.21%, by the end of July 2023.
There is however some indication that the overall performance of the broader fund has not yet met its target, with performance still down roughly 67.60% by the end of Q2 2023 since its inception in 2021.
However, this is still slightly below the overall market performance, which has fallen by 68.67% for the same recorded period.
BKCH makes an impressive statement as a heavily diversified fund, that seeks to attract investors that are seeking exposure to the blockchain market through more diversified, and less riskier investment options.
Overall, there could be an upside for the fund in the coming years, seeing as some of its biggest holdings are allocated to technology and software companies. This could lend itself to be more geared toward tech-hungry investors that are feeling more optimistic over the tech market as the recent Artificial Intelligence (AI) boom is helping to fuel the tech rebound.
Amplify Transformational Data Sharing ETF
This is perhaps the most established fund on our list, as the Amplify Transformational Data Sharing ETF (NYMARKET:BLOK) was first launched back in 2018, several years before the hype surrounding blockchain technology and cryptocurrencies began to rally.
The overall objective of the fund is to provide a total return of roughly 80% of its net assets. Like many other types of crypto-based ETFs, this fund is heavily invested in the development and future utilization of diverse blockchain services and products.
Among a colorful range of industries that the fund is currently invested in, software (29%), capital markets (18%), IT services (13%), financial services (9%), and banks (7%) make up the majority of asset allocation.
Interestingly enough, a good deal – about 83% – of the fund is allocated to regional securities in North America, with the remaining 17% allocated to companies in Asia.
Based on the fund’s most recent financial performance, running until July 31, 2023, the fund has gained 70.89% year-to-date, and an overall of 31.82% in the last six months. The fund has a one-year annualized performance growth of 18.86% and an 8.49% annualized performance since its inception.
As of August 2023, the top five holdings, with the biggest allocation, include Microstrategy (NASDAQ:MSTR), Marathon Digital Holdings (NASDAQ:MARA), Coinbase (NASDAQ:COIN), Overstock (NASDAQ:OSTK), and Riot Platform (NASDAQ:RIOT), which is seemingly similar to the Global X Blockchain ETF.
Perhaps something that stands out about this fund, compared to others, is that BLOK is looking to capture the transformative movement of cryptocurrencies, such as BTC, but also provide investors with more solid support for companies that are continuously using blockchain technology to become digital disruptors.
Another Crypto Bull Run
One thing investors need to remember is that the crypto market, similar to others, is highly cyclical. In an interview with Cointelegraph, Kevin Kelly, co-founder of Delphi Digital, believes that the crypto market continues to be highly cyclical, however, these cycles are consistent with historic measures.
Analysts have shared the possibility that a crypto bull run could make an appearance in the coming months, leading into next year.
As the Federal Reserve begins to ease its monetary tightening policy and the approval of more crypto ETFs by regulators could be the fundamental factor that investors have been waiting for all along.
The biggest catalyst could potentially be the approval of a spot Bitcoin ETF. Earlier in the summer, BlackRock (NYSE:BLK), one of the world’s largest investment firms, announced that it has submitted filings to the SEC for the approval of the security, allowing it to generate increased interest from investors.
Similar to BlackRock, ARK 21Shares, under the helm of Cathie Woods filed similar documentation to the SEC in May 2023 to list its spot Bitcoin ETF. However, the SEC has been somewhat hawkish about the probability, pushing back the deadlines of ARK’s submission, as it awaits further proposal recommendations and public comments.
There have been several attempts by multiple investment firms in recent years to potentially list a spot Bitcoin ETF. However, back then, the SEC outright declined these submissions, as the regulator knew too little about digital currencies and assets of the sort.
The timing of these possible listings comes at a crucial time for the crypto industry, with not only American regulators, but foreign lawmakers all looking to question the risks crypto trading can hold for investors and perhaps the broader financial ecosystem.
There is clearly a lot taking place in the crypto market at the moment, and investors are gearing themselves for yet another exciting few months with digital assets, including some coins now beginning to indicate the potential of a crypto bull run.
There are however a few skeptics that are throwing their weight around, yet, this is nothing new in a marketplace that has been scrutinized over its mysterious, and seemingly shadowy activity.
Investors are instead looking to back ETFs that can provide them with the crypto and blockchain exposure they require, without having to run the risk of sudden volatile changes. There is some evidence that suggests we could be at the cusp of a new crypto bull run, and that the crypto winter is starting to wane.
Looking forward, investors will need to position themselves in such a way whereby they can fully leverage the gains of digital assets, but further tap the potential of blockchain technology against the backdrop of the AI revolution.