Cryptocurrency

With investors persistently looking for new ways to diversify their market portfolio, Maxim Manturov, Head of Investment Advice at Freedom Finance Europe, outlines three promising crypto ETFs to consider over the next few months. 

Cryptocurrency continues to catch the eye of many investors, with the demand for digital currencies growing significantly year on year. Offering greater choice, independence, and opportunity in their finances, cryptocurrency is a great investment for those willing to accept that this type of trading often comes with risk. 

As part of this trend, crypto exchange-traded funds (ETFs) are soaring in popularity amongst investors, by making it as easy to invest in Bitcoin as it is to buy popular stocks. On top of this, rather than attempting to pick a high-earning crypto yourself, an ETF offers exposure to a basket of different cryptos and provides easier access to the world of cryptocurrency.

In light of this, let’s take a look at the benefits of investing in crypto ETFs and three of the most promising crypto ETFs to watch over the coming months.

 

What is a crypto ETF?

An ETF is a pool of shares or assets that are grouped together, then sold on a stock exchange. This effectively allows for a variety of shares or assets to be owned through the ownership of just one share in the ETF.

A crypto ETF is very similar to your standard ETF. However, rather than tracking an index or basket of assets, a crypto ETF tracks the price of one or more digital tokens. This enables you to leverage the price of Bitcoin without having to learn the intricacies of how Bitcoin works.

Many investors are interested in crypto ETFs due to the benefits they bring at relatively low effort. Whether that be flexibility with trading, diversifying your portfolio, or lower cost of ownership, ETFs are a simple and easy way of gaining exposure to Bitcoin. 

 

The top three crypto-ETFs with the highest growth potential

1. The Siren Nasdaq NexGen Economy ETF (BLCN) is one of the first ETFs to focus on blockchain technology. With assets under management (AUM) at £142.5m, the fund tracks an index of global companies committed to blockchain development. Although the index committee is not active, it has broad authority in selecting companies. 

The main criterion used to evaluate a company is the level of material resources it has committed to researching, developing, supporting, and expanding the use of blockchain technology. It appears that distributed ledger technology, the blockchain, will play a central role in the economic transactions of the future. 

Given the recent weakness amid a general market correction, BLCN shares could be an interesting buy after breaking resistance of £27.3, in which case a move towards £34.95 is likely, making the growth potential 28.0%.​

2. ​​​Amplify Transformational Data Sharing ETF (BLOK) is an actively managed portfolio, mainly composed of global blockchain-focused stocks. With assets under management (AUM) at £671.6m, BLOK seeks to invest in companies developing or using what it calls “transformational data sharing technologies”, primarily focusing on blockchain technology. 

Blockchain, the technology that drives Bitcoins, is a distributed peer-to-peer ledger that facilitates transaction recording and asset tracking in the business environment. The growing blockchain ecosystem is a rapidly changing environment that includes many different industries because of the large number of applications. This relatively young market has great growth potential as the number of users increases and developers continue to create the so-called new Internet. 

Should it break resistance at £24.2, a growth of 34.4% is likely, changing the levels towards £32.52.

3. ProShares Bitcoin Strategy ETF (BITO) provides access to Bitcoin (BTC) dynamics in an ETF shell. The fund does not invest directly in Bitcoin but invests in Bitcoin futures, this is worth keeping in mind as there may be some lag in the price of Bitcoin. 

Bitcoin futures are traded in contango, which means that the next month’s price is higher than the previous months. Every time the fund sells futures contracts closer to expiration, it sells the cheaper contract to buy the more expensive one. This process affects the fund’s net asset value (NAV), which causes it to lag slightly behind spot Bitcoin. Nevertheless, this ETF is the most affordable way to have exposure to Bitcoin via stock market instruments. 

Overall, BTC dynamics have been good lately, on the back of rising demand, BITO stock could be interesting to buy after breaking resistance at £18.5, the growth potential of 36.3% is possible, making a new price of £25.22.