Cryptocurrency ETF
6 min readAug 21, 2020

Cryptocurrency-oriented exchange-traded funds (ETF trading) operate similarly to all well-established ETF trading which monitors a number of stocks or a particular index on the exchange. It trails the dynamics of one or multiple cryptocurrencies from your investment portfolio. As traders are actively buying and selling various cryptocurrencies and virtual tokens throughout a certain period of time, digital asset ETF tradings are often exposed to price variations.

How does ETF trading work?

The company running the fund must possess the virtual coins that it monitors with a goal to ensure ETF trading’s smooth operation and functionality. Put another way, the virtual coins which support ETF trading should own a sufficient share of digital assets, which will later be characterized as shares and by purchasing them the ETF trading could circumlocutory control those shares. In this case, investors who are interested in ETF trading would get an appropriate experience and opinion on how far a digital token may increase in price over a specific period of time.

The US financial authorities, in line with a variety of other influential regulators and organizations in the field, has pointed out that it can not authorize digital tokens EFTs and ETF trading before the whole sector shows a satisfactory level of strength and trustworthiness. Nevertheless, the SEC’s ruling has not prevented several companies from trying to open digital tokens and start ETF tradings. Some other well-established financial regulatory organizations and influencers, such as the famous tech brothers Winkelows, have campaigned and petitioned for the financial authority to change its opinion regarding virtual tokens and ETF tradings but so far with no progress. One of the world’s most popular US crypto exchanges Coinbase has introduced a special index fund providing services to 4 largest cryptocurrencies, but the Fund itself can not be considered an ETF trading. At the same time, several ETF tradings provide limited exposure to Bitcoin Investment Fund but they are not entirely digital tokens-based.

At the same time, the authoritative US organization in the field of financial regulations has stated that it is open to the probability of virtual tokens investment organizations and ETF trading and constantly monitors the situation around them and this fact could definitely encourage traders and investors from all around the world to stay hopeful and optimistic in case virtual currency ETF tradings develop outside the USA in the foreseeable future. For example, numerous financial organizations in different parts of the world have launched digital token ETF tradings due to more favorable regulations.

Alternatives to cryptocurrency ETFs and ETF trading

As of today, cryptocurrency ETF tradings are not authorized to operate on the territory of the USA. That’s why the investors from North America are actively searching for alternative options and the Bitcoin Investment Trust, or GBTC, is a really appropriate choice in current circumstances. From many points of view, GBTC resembles a full-fledged exchange-traded fund, because it is in charge of BTC on the side of shareholders and enables them to perform ETF trading operations in shares of the organization. GIT organization is the Trust’s key sponsor which imposes a 2% management cost, which is substantially higher than what the majority of ETF tradings would charge. What is more, GBTC has also encountered some unreasonable price inconstancies in relation to the alterations in the Bitcoin regularly estimated value. It means that the BTC price offered by GBTC is not 100% of time-correlated with its price on the cryptocurrency exchanges. That’s why GBTC and ETF trading are not available to ordinary investors because of its large expense proportions and increased minimum contribution (fiat).

In these circumstances, American investors only have three available options for ETF trading. Some of them decide to go for international exchange-traded funds. Other investors choose to go through a stringent authorization and money verification process in order to gain access to GBTC. At the same time, most of the investors are considering a third popular option — blockchain-based ETF trading.

Check European crypto market overview: regulations and best anonymous crypto exchanges in Europe

Blockchain ETFs to consider

Blockchain has unlimited possibilities and a huge potential in various spheres including ETF trading. What is more, this cutting-edge technology is widely associated with Bitcoin and virtual altcoins. These days, many ETFs are shifting their ETF trading focus towards blockchain-based companies, namely manufacturers and software developers who work closely with the virtual coins' market on a daily basis. What is more, some of the most famous and established ETF trading enables investors to successfully connect with blockchain-based companies.

Blockchain-oriented ETF trading possesses shares in corporations and startups that promote or develop blockchain technology and ultimately take financial advantage of it. While modern blockchain has emerged on the market relatively recently, there are many well-established companies that successfully operate in the field. IBM, Amazon, and SAP are the most well-known examples of those companies. Investing in technologies, such as blockchain still sounds quite risky for many investors because of its association with Bitcoin and cryptocurrencies. At the same time, blockchain is an innovative technology that can improve numerous sectors and industries. Thus, blockchain Funds invest in established companies’ stocks which are regulated by financial authorities.

BLCN is probably the most influential blockchain ETF trading which promotes a combined approach, that is financially contributing to a different type of stocks simultaneously and mainly operates across developed markets. This ETF trading prioritizes work with innovative technologies, such as blockchain, e-commerce, and machine learning.

BLOCK is an ETF trading that is primarily cooperating with the business field and cutting-edge technologies. Since 2017 when the blockchain has reached the peak of its popularity, the Fund has been actively working with companies that work with blockchain which promotes the development of the blockchain industry. This ETF trading owns some of the most well-known holdings in Japan-based corporations which have great development potential.

Similar to BLCN and BLOCK, LEGR, also supports a mixed strategy. The Fund actively supports the most promising technologies, such as Artificial Intelligence and blockchain. This ETF trading’s main holdings are based in China and Japan-located multinational companies that specialize in trade and commerce.

Crypto ETFs advantages

The cryptocurrency field is very dynamic and progressive. For this reason, some Bitcoin and altcoins have experienced unprecedented gains since its boom in 2017. At the same time, this sector is still associated with growing instability and severe volatility. Thus, many experienced traders and businessmen more eagerly cooperate with a reliable partner like an exchange-traded fund in order to safely engage in crypto and Bitcoin-related operations. Cryptocurrency and Bitcoin ETF trading allow traders to enjoy numerous perks of each particular blockchain project and its native coin while delegating various complicated administration and other related issues to a bunch of professionals. Presuming that cryptocurrencies in general, as well as their corresponding wallets and online exchanges, are exposed to security attacks and scams, stakeholders often prefer to take an extra step and refer to well-established ETF trading with a goal to protect their digital assets.

Investing with a crypto ETF trading has various important advantages. First of all, ETF trading is more secure in terms of transfers and transactions. Active trading makes your digital funds more exposed to hacker attacks and thievery attempts. Thus, independent stakeholders should always recognize the risk that their cryptocurrencies might be stolen if they do not take extra security steps and choose a trustworthy Bitcoin exchange, such as Godex, or select a credible hardware wallet. Virtual coins ETF tradings offer an extra level of protection and security which is very important for a highly volatile cryptocurrency field. Secondly, cryptocurrency ETF tradings offer shareholders and traders to simultaneously track various Bitcoin and virtual coins. Considering that there are several thousands of different altcoins on the market, it can be quite challenging to track their performance and dynamics. Even with 20 different digital currencies in your investment basket, it might be hard to find a wallet or cryptocurrency exchange that would support all of them at once.

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