Cryptocurrency ETFs are still new to the market but there's enough data to see which funds are leading in performance. Here, we feature a list of five crypto ETFs that had the highest year-to-date returns through February 4, 2022. In addition to performance, we also review key statistics, including expenses and holdings.
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Cryptocurrency ETFs: What They Are & How They Work
A cryptocurrency ETF is an exchange-traded fund that seeks to track the price of one or more digital currencies. Cryptocurrency ETFs do not directly hold cryptocurrency. Instead, they are either backed by physical cryptocurrencies or they may hold derivatives, such as futures contracts, which enable the fund to gain exposure to crypto prices without taking possession of the digital currency.
The first cryptocurrency ETF, ProShares Bitcoin Strategy ETF (BITO), became available to investors on October 19, 2021. Prior to that milestone, there were 13 applications awaiting SEC approval for new cryptocurrency ETFs. As of December 2021, the SEC had only approved ETFs that hold bitcoin cryptocurrency futures, as the United States still waits on the sidelines for a physically backed cryptocurrency ETF.
Some ETFs provide indirect or limited exposure to cryptocurrency by holding equity positions in blockchain miners or in businesses that may profit from blockchain technology in some way. These funds are generally referred to as "blockchain ETFs."
Tip: Some investors may choose to invest in cryptocurrency ETFs to avoid having to directly hold or manage the digital currency themselves. However, investors should keep in mind that crypto ETFs remain speculative investments and still carry significant risk of price fluctuation.
Evaluating a Cryptocurrency ETF
- Performance: This list of crypto ETFs reviews YTD performance through February 4, 2022.
- Expenses: When ETFs track the exact same index or commodity, the one with the lowest expense ratio will generally outperform those with higher expenses. Investors should note that cryptocurrency ETFs on the market today have higher expenses than the typical ETF that tracks a broad stock market index.
- Structure: Many ETFs that seek to replicate the performance of a single commodity or currency are structured as grantor trusts because they allow the funds to hold few assets without violating the usual fund rules about diversification. Some cryptocurrency ETFs are structured as corporations for tax-efficiency purposes, while others are structured as Registered Investment Companies.
- Objective: To make our best performing cryptocurrency ETFs list, only ETFs that seek to track the price of one or more digital currencies, less fund expenses, are considered. Other crypto-related ETF objectives and strategies, such as closed-end trusts, and ETFs with limited exposure to cryptocurrency, were ignored for this list.
- Portfolio holdings: ETFs that track the price of one or more cryptocurrencies don't have holdings like stock or bond mutual funds; they typically hold cryptocurrency futures contracts, plus US Treasuries or short-term cash instruments.
Important: There is no guarantee that cryptocurrency ETFs will consistently and tightly track the price of the underlying digital currency or basket of cryptocurrencies. Investors should also note that futures markets provide an opportunity to gain exposure to an underlying asset without owning it outright. However, regardless of whether an investor transacts directly in the futures market, or whether they invest in ETFs that hold futures positions, the investor is exposed to potential value erosion through futures rollover risk.
5 Best Cryptocurrency ETFs by Performance
| ETF & Ticker | YTD Performance |
| ProShares Bitcoin Strategy ETF (BITO) | -11.56% |
| Valkieri Bitcoin Strategy ETF (BTF) | -12.35 |
| Bitwise 10 Crypto Index (BITW) | -13.97% |
| VanEck Bitcoin Strategy ETF (XBTF) | -16.23% |
| Global X Blockchain and Bitcoin Strategy ETF (NASDAQ:BITS) | -16.45% |
1. ProShares Bitcoin Strategy ETF (BITO)
ProShares Bitcoin Strategy ETF is an actively-managed exchange-traded fund that seeks capital appreciation by investing in bitcoin futures contracts. BITO is the first futures-based cryptocurrency ETF on the market and is also the largest, as measured by assets under management.
- As of date: February 4, 2022
- YTD performance (price): -11.56%
- Expense Ratio: 0.95%, or $95 annually for every $10,000 invested
- Annual Dividend Yield: None
- Average Daily Volume: 9,012,909
ProShares Bitcoin Strategy ETF Performance
| YTD 2022 Return | |
| ProShares Bitcoin Strategy ETF | -11.56% |
| Bitcoin USD | -10.34% |
| S&P 500 Index | -5.53% |
ProShares Bitcoin Strategy ETF (BITO) performed slightly below the Bitcoin USD price benchmark. Tracking the benchmark can be inconsistent because bitcoin futures ETFs track contracts that speculate on the future price of the digital currency, rather than the current or "spot price" of the asset itself.
Like other cryptocurrency ETFs that hold Bitcoin futures contracts, BITO significantly underperformed the S&P 500 index year-to-date 2022.
BITO Structure, Objective & Holdings
- Inception Date: 10/18/2021
- Issuer: ProShares Advisors LLC
- Ticker: BITO
- Primary exchange: NYSE arca
- Structure: Registered Investment Company
- Objective: Seeks capital appreciation by investing in bitcoin futures contracts.
- Holdings: Bitcoin futures, US Treasury Bonds
2. Valkyrie Bitcoin Strategy ETF (BTF)
Valkyrie Bitcoin Strategy ETF is an actively managed ETF available through Nasdaq that invests primarily in bitcoin futures contracts. Although BTF does not have the lowest expense ratio among bitcoin cryptocurrency ETFs on the market, its active management strategy was able to outperform its category peers.
- As of date: February 4, 2022
- YTD performance (price): -13.97%
- Expense Ratio: 0.95%, or $95 annually for every $10,000 invested
- Annual Dividend Yield: None
- Average Daily Volume: 882,083
Valkyrie Bitcoin Strategy ETF Performance
| YTD 2022 Return | |
| Valkyrie Bitcoin Strategy ETF | -12.35% |
| Bitcoin USD | -10.34% |
| S&P 500 Index | -5.53% |
Valkyrie Bitcoin Strategy ETF (BTF) performed significantly below the Bitcoin USD price benchmark. This is because bitcoin futures ETFs track contracts that speculate on the future price of the digital currency, rather than the current or "spot price" of the asset itself.
Like other cryptocurrency ETFs that hold Bitcoin futures contracts, BTF significantly underperformed the S&P 500 index year-to-date 2022.
BTF Structure, Objective & Holdings
- Inception Date: 10/21/2021
- Issuer: Valkyrie Funds LLC
- Ticker: BTF
- Primary exchange: Nasdaq
- Structure: Open-end fund, Regulated Investment Company, or RIC.
- Objective: Seeks capital appreciation by investing in bitcoin futures contracts.
- Holdings: Bitcoin Futures, US Treasury Bonds
3. Bitwise 10 Crypto Index (BITW)
Bitwise 10 Crypto Index offers exposure to 10 leading cryptocurrencies, including bitcoin. More specifically, BITW seeks to track the performance of an index the 10 most highly valued cryptocurrencies, which are then screened and monitored for certain risks, weighted by market capitalization, and rebalanced monthly.
BITW is an alternative crypto ETF, in that it does not purchase Bitcoin futures contracts. Investors should also note that BITW is structured as a partnership, which means that investors are issued a K-1 at the end of the tax year. Investors should be sure to understand the tax implications of an investment in the fund. Additionally, expenses of 2.50% are high for an ETF.
- As of date: February 4, 2022
- YTD performance (price): -13.97%
- Expense Ratio: 2.50%, or $250 annually for every $10,000 invested
- Annual Dividend Yield: None
- Average Daily Volume: 176,569
Bitwise 10 Crypto Index ETF Performance
| YTD 2022 Return | |
| Bitwise 10 Crypto Index ETF | -13.97% |
| Bitcoin USD | -10.34% |
| S&P 500 Index | -5.53% |
Bitwise 10 Crypto ETF performed significantly below the Bitcoin USD price. This is primarily because BITW tracks an index that includes cryptocurrencies other than bitcoin. Thus, investors can compare and contrast BITW to Bitcoin USD, but should not expect performance to be consistent with that benchmark.
Like other cryptocurrency ETFs, BITW significantly underperformed the S&P 500 index year-to-date through February 4, 2022.
BITW Structure, Objective & Holdings
- Inception Date: 11/22/2017
- Issuer: Bitwise Investment Advisers, LLC
- Ticker: BITW
- Primary exchange: OTCMKTS
- Structure: Partnership
- Objective: Seeks to track an index of 10 cryptocurrencies.
- Holdings: Bitcoin and Ethereum represent nearly 80% of the index. The remaining holdings consist of Solana, Cardano, Avalanche, Polygon, Algorand, Chainlink, Litecoin, and Bitcoin cash.
4. VanEck Bitcoin Strategy ETF (XBTF)
VanEck Bitcoin Strategy ETF is an actively-managed exchange-traded fund that seeks capital appreciation by investing bitcoin futures contracts. XBTF has the lowest expense ratio among bitcoin cryptocurrency ETFs, although its performance is not superior to other category leaders.
- As of date: February 4, 2022
- 1-month performance (price): -16.23%
- Expense Ratio: 0.65%, or $65 annually for every $10,000 invested
- Annual Dividend Yield: None
- Average Daily Volume: 75,491
VanEck Bitcoin Strategy ETF Performance
| YTD 2022 Return | |
| VanEck Bitcoin Strategy ETF | -16.23% |
| Bitcoin USD | -10.34% |
| S&P 500 Index | -5.53% |
VanEck Bitcoin Strategy ETF (XBTF) performed significantly below the Bitcoin USD price benchmark. This is because bitcoin futures ETFs track contracts that speculate on the future price of the digital currency, rather than the current or "spot price" of the asset itself.
Like other cryptocurrency ETFs that hold Bitcoin futures contracts, XBTF significantly underperformed the S&P 500 index over the past month.
XBTF Structure, Objective & Holdings
- Inception Date: 11/15/2021
- Issuer: Van Eck Associates Corporation
- Ticker: XBTF
- Primary exchange: CBOE
- Structure: C-Corporation
- Objective: Seeks capital appreciation by investing in bitcoin futures contracts.
- Holdings: Bitcoin futures, US Treasury Bonds
5. Global X Blockchain and Bitcoin Strategy ETF (BITS)
Global X Blockchain and Bitcoin Strategy ETF is an actively-managed exchange-traded fund that seeks capital appreciation by investing in a combination of companies involved in blockchain technology and in bitcoin futures contracts.
- As of date: February 4, 2022
- YTD 2022 performance (price): -16.94%
- Expense Ratio: 0.65%, or $65 annually for every $10,000 invested
- Annual Dividend Yield: None
- Average Daily Volume: 13,149
Global X Blockchain and Bitcoin Strategy ETF Performance
| YTD 2022 Return | |
| Global X Blockchain and Bitcoin Strategy ETF | -16.45% |
| Bitcoin USD | -10.34% |
| S&P 500 Index | -5.53% |
Global X Blockchain and Bitcoin Strategy ETF (BITS) performed significantly below the Bitcoin USD price benchmark. This is because BITS is an actively-managed fund that includes blockchain companies in its portfolio, in addition to bitcoin futures contracts.
Like the other top cryptocurrency ETFs, BITS significantly underperformed the S&P 500 index over the past month.
BITS Structure, Objective & Holdings
- Inception Date: 11/15/2021
- Issuer: Global X Management Company LLC
- Ticker: BITS
- Primary exchange: Nasdaq
- Structure: Open Ended Investment Company
- Objective: Seeks to capture the long-term growth potential of the blockchain and digital assets theme.
- Holdings: Global X Blockchain ETF (BKCH) and Bitcoin Futures
Bottom Line
Cryptocurrency ETFs provide indirect exposure to digital currency by holding futures contracts, and at times equity positions in businesses exposed to blockchain technology, so shareholders do not take possession of the physical asset. Investors should keep in mind that using futures tends to cause disconnects with the underlying value of the asset being tracked, which can cause the ETF's performance to differ from that of its benchmark cryptocurrency.
Warning: This article is for information purposes only; thus, under no circumstances does this information represent a specific recommendation to buy or sell securities. Furthermore, past performance is no guarantee of future results.