This article was written exclusively for Investing.com
- BITO bursts onto the scene
- BTF is a competitor
- GBTC has been around for some time
- BLOK and BITQ: adjacent crypto
- BITW tracks a crypto index
The battle for dominance of the following stock products and the cryptocurrency asset class intensified when the ProShares Bitcoin Strategy (NYSE 🙂 ETF began trading on October 19, 2021. The ETF product based on So advertised futures contracts expose investors and traders to. Meanwhile, there are now many more choices that correlate with the leading crypto and the overall asset class.
Competition improves the market. In a 2004 book, The wisdom of crowds, author James Surowiecki documented examples of “why many are smarter than a few; and how collective wisdom shapes businesses, economies, societies, and nations.“The book applies to cryptocurrencies on several levels.
The growth of the asset class reflects the growing distrust of legal tender issued by governments that derive value from faith and credit in these mediums of exchange. When it comes to ETFs and other trading and investing products that reflect the price action of Bitcoin and other cryptos, the wisdom of the crowd will reward those that perform best.
Market participants have choices in the asset class. New products will continue to enter the market now that the United States Securities and Exchange Commission (SEC) has paved the way for futures-based tools.
However, the most effective products may still be in development as none of the current tools hold Bitcoin or other cryptos as custodians. Holding futures contracts, mining cryptos, or other activities does not allow for a real portfolio of booming mediums of exchange that challenge traditional foreign exchange products.
BITO bursts onto the scene
The BITO ETF started trading on October 19. The proceeds follow the CME futures contract. The daily chart shows the volatility of futures contracts since the fund launched on October 19.
As the chart shows, Bitcoin futures fell from $ 61,905 at the opening on October 19 to a high of $ 67,680 on October 20, gaining 9.3%. They corrected to a low of $ 57,855 on October 27 and recovered to a high of $ 62,400 on October 28. They fell 14.5% from the peak before the 7.9% recovery.
Over the same period, BITO went from $ 40.88 at the October 19 opening to $ 43.95 per share on October 20, a 7.5% increase. BITO fell to $ 37.34 on October 28, a 15% drop from the peak. The price peaked at $ 40.72 on October 29 or + 9%.
The disadvantages of BITO are:
- They track the price of Bitcoin futures, a derivative, and not the actual price of the physical Bitcoin token.
- BITO and CME Bitcoin futures contracts only trade during the hours when the US stock market is operating. Bitcoin trades 24/7.
- BITO is a derivative of a derivative, charging a healthy 0.95% management fee.
BITO is one of the many other products that market participants use to track the leading cryptocurrency. As of the end of last week, BITO had nearly $ 1.178 billion in assets under management and was actively trading with over 7.0 million shares changing hands on October 29.
BTF is a competitor
The Valkyrie Bitcoin Strategy (NASDAQ 🙂 ETF started trading three days after BITO. BTF’s fund summary states:
Source: bar chart
BTF appears to be virtually the same product as BITO and charges the same 0.95% management fee. BTF had $ 52.95 million in assets under management at the end of last week, with 272,400 shares changing hands on October 29.
BTF invests in the first month CME Bitcoin futures contracts through a Cayman Islands affiliate, so investors do not need to file a K-1 form with the IRS.
Source: bar chart
The BTF product appears to be tracking Bitcoin futures well during the early trading sessions.
GBTC has been around for some time
Grayscale Bitcoin Trust (OTC 🙂 is a closed-end assignee trust, meaning that it issued a fixed number of shares when it went public and traded in the over-the-counter market. However, GBTC shares represent a non-fixed number of bitcoins.
Bitcoin futures rose from $ 28,800 at the end of June to a high of $ 67,680 on October 18, or + 135%.
Source: bar chart
Over the same period, GBTC has gone from $ 24.00 to $ 52.68 per share, or + 119.5%.
Yet GBTC charges a very high management fee, 2%. GBTC had over $ 36 billion in assets under management and trades an average of over 8.5 million shares every day.
BLOK and BITQ: adjacent crypto
The Amplify Transformational Data Sharing (NYSE 🙂 ETF product and Bitwise Crypto Industry Innovators (NYSE 🙂 ETF product hold portfolios of companies that may benefit from rising cryptocurrency prices.
The fund summary and top holdings of BLOK include:
Source: Yahoo Finance
At $ 55.47 per share, BLOK has more than $ 1.465 billion in assets under management. It trades on average over 457,000 shares each day and charges a management fee of 0.71%.
BITQ’s fund summary indicates:
Source: bar chart
At $ 28.22 per share, BITQ had approximately $ 97.65 million in assets under management and trades an average of over 108,000 shares every day. The ETF charges a management fee of 0.85%.
BITQ moves with the Bitwise Crypto Innovators 30 Index. BLOK and BITQ are both crypto soup as they are likely to rise and fall with the fortunes of companies related to the cryptocurrency and blockchain asset class.
BITW tracks a crypto index
The Bitwise 10 Crypto Index Fund (OTC 🙂 tracks the performance of the Bitwise 10 Large Cap Crypto Index, which includes the ten largest investable cryptos that represent 70% of the total market.
As BITW weights its holdings by market cap, Bitcoin accounts for 65% of the portfolio, for 25%, with a distant third at 4%. BITW had around $ 1.2 billion in assets under management at $ 50.25 per share.
The ETF charges a very high management fee of 2.5%. On average, over 177,000 BITW shares change hands every day.
BLOK and BITQ are pickax and shovel games. BITW offers some exposure to a diversified portfolio of the most liquid cryptos. BITO and BTF track futures contracts.
The next step will be an SPDR® Shares (NYSE 🙂 ETF which holds a portfolio of Bitcoin and other cryptocurrencies. However, we will have to wait for the market to sort out the custody and security issues.
Jack Dorsey’s Square (NYSE 🙂 is working on a solution that could provide regulators with a higher level of convenience to allow them to approve physical cryptocurrency ETF products that move directly with token prices.
For now, however, the funds mentioned above are the closest route to the burgeoning asset class for investors looking to enter the crypto market, without the extreme volatility. or expenses related to the possession of Bitcoin.