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Cryptocurrency ETFs explained: A simple guide for investors

ETFs give you a convenient way of investing in cryptocurrency, but they may not be the most cost-effective.

We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!

Disclaimer: This information should not be interpreted as either an endorsement or recommendation of managed investment schemes, cryptocurrency or any specific provider, service or offering. Consider your own circumstances and obtain independent advice before acting on this information.

What is a cryptocurrency ETF?

An exchange-traded fund (ETF) is a collection (often called a "basket") of assets that are designed to track the performance of a particular index, commodity or asset. ETFs can be bought and sold on a stock market in the same way investors can trade stocks of a company.

For example, a gold ETF grants investors exposure to the value of gold without ever having to own any.

Cryptocurrency ETFs are designed to give investors exposure to the cryptocurrency market. These funds may track the price of 1 or more digital coins or tokens. This lets investors gain exposure to the value of crypto without the risks associated with owning any digital currency. Some of these risks include:

  • Custody. While the vast majority of cryptocurrency exchanges hold funds on your behalf, some users are still nervous about the storage of cryptocurrencies. Exchanges have been hacked in the past and the personal storage of cryptocurrencies is not always the most straightforward.
  • Regulation. Although an increasing number are choosing to obtain relevant licensing, many cryptocurrency exchanges remain unregulated. As a result, the funds stored on most exchanges are not protected to the same level as money in a bank account or traditional stock trading platform.
  • Mistakes. Cryptocurrencies are unforgiving – send funds to the wrong address and they are likely lost forever. While investors don't need to move cryptocurrencies from one address to another, the reputation for difficulty deters investors.

Cryptocurrency ETFs largely avoid most of these risks. Packaged within highly regulated investment vehicles, most ETFs can only be accessed through traditional outlets, such as stockbrokers.

Units or shares of an ETF can be bought and sold on most security exchanges. The price fluctuates throughout the day as investors buy and sell. Keep in mind that ETFs only trade during market hours, while cryptocurrency trades 24/7. This can lead to a discrepancy between the price of the fund and the spot market.

Investors also need to pay a management fee to the ETF issuer, but this is often included in the unit price. ETFs generally have lower fees compared to traditional managed funds (like a hedge fund), but higher fees than the cryptocurrency spot market.

The simplest way for a crypto ETF to track the price of an underlying digital currency is to purchase and store that cryptocurrency. The financial institution managing the ETF then divides ownership of those coins into shares which are distributed between stakeholders. Alongside cryptocurrencies, futures contracts can also be used to track underlying prices. These contracts are a type of derivative product that allow investors to "bet" on whether they think the price of a given cryptocurrency will rise or fall over a set period of time. Futures-based cryptocurrency ETFs were the first type to be approved by the SEC.

How do cryptocurrency ETFs work?

Broadly speaking, there are 3 types of cryptocurrency ETFs:

Physical-backed crypto ETFs

These hold actual coins and tokens to underpin the value of the ETF. If the value of the digital coins owned by the ETF rises, the value of each ETF share also increases.

  • Pros. Physical-backed ETFs are the most direct way of investing in crypto via a fund. The fund essentially holds coins on an investor's behalf and, therefore, is a good proxy for people who cannot or do not want to own actual coins.
  • Cons. Physical-backed ETFs frequently lag behind the market and trading is restricted to market hours (unlike actual crypto which trades 24/7). Availability is also limited depending on what markets you have access to. For example, in Canada, retail customers can purchase physical ETFs, but in the US they are regulated to accredited investors.

Futures-backed crypto ETFs

With this type of ETF, shares in the fund aren't based on actual coins but on futures contracts. A futures contract is an agreement that sets a fixed price and date for buying or selling an asset. As a result, they allow investors to profit in both bearish and bullish markets. Futures-backed ETFs are typically used when holding the underlying asset would be problematic, such as storing barrels of oil, or safely securing cryptocurrency.

  • Pros. This type of ETF is the first to receive approval for retail customers in the US as the fund is not directly exposed to the risks associated with storing cryptocurrency. It is currently the closest product that many retail investors have to a regulated crypto ETF.
  • Cons. Futures-backed ETFs can be expensive compared to a physical ETF or real crypto. On top of the ETF management fees is the risk of contango, where futures contracts cost more than the underlying asset. This can cause futures-based ETFs to trade at a premium compared to the spot market, making them worse value for money than purchasing actual coins.

Picks and shovels crypto ETFs

This type of ETF is quite different to the others as it is based on stocks of cryptocurrency or blockchain-related companies. The idea is to give exposure to the wider blockchain industry (the technology behind most cryptocurrencies) through a basket of stocks. For instance, the Bitwise Crypto Industry Innovators ETF is made up of publicly traded exchanges (Coinbase, Robinhood), hedge funds (Galaxy Digital), mining firms (Hut 8) and companies that hold crypto in their treasury (MicroStrategy, Tesla).

  • Pros. Stock-based ETFs provide a convenient way of gaining exposure to the wider industry through a mixture of companies. This type of ETF is also less volatile than ETFs that track the underlying value of cryptocurrencies.
  • Cons. However, less volatility also means there could be less room for growth. In addition, the cryptocurrency industry is still in the midst of regulation around the globe, which could negatively impact the prospects of some of the companies listed in these ETFs.

    How crypto ETFs work

    To help understand ETFs a little better, let's take a look at a hypothetical example.

    The hypothetical XYZ ETF is designed to track the performance of the world's 5 biggest cryptocurrencies by market cap – Bitcoin, Ethereum, XRP, Cardano and Binance Coin.

    The company that issues the ETF owns a specified amount of each of the 5 currencies, and the ownership of these tokens is divided into shares. Investors then buy and sell those ETF shares on stock exchanges in the hope of benefiting from price increases of the underlying digital currencies.

    Let's assume that the value of 1 unit of XYZ ETF is $50, and an investor decides to purchase 10 units for a total of $500. After 12 months of growth for global crypto markets, the XYZ ETF unit price has risen to $100, meaning the total investment is now valued at $1,000.

    Had the investor taken a more traditional approach and decided to buy each of the 5 cryptocurrencies individually, they would have needed to create 1 or more cryptocurrency wallets and register for an account on a crypto exchange, paid brokerage fees for each individual crypto trade, and then tracked the price movements of each coin across the past year.

    With a cryptocurrency ETF, it's easier and far less time-consuming to gain access to a diverse portfolio of crypto assets.

Benefits vs risks of cryptocurrency ETFs

Just like any other type of investment, cryptocurrency ETFs have a range of pros and cons. It's essential that you weigh up the potential benefits against the risks involved before deciding whether you should invest.

  • Simplicity. Learning how to buy and store cryptocurrency can be a difficult or nerve-racking process for some. ETFs make it simple to gain exposure to digital currencies without going through the hassle of owning any coins.
  • Accessibility. An increasing number of cryptocurrency ETFs are available through traditional stockbrokers and exchanges. In addition to making them easy to access, they also come with the legal and regulatory protections associated with such services.
  • Diversification. Some ETFs offer a basket of various cryptocurrencies that streamlines the process of building a diverse portfolio. It prevents the need to purchase several currencies, which could involve multiple exchange accounts, wallets and technical understanding.
  • Security. Cryptocurrency exchanges and wallets are susceptible to hacking attacks and theft. Buying units in a crypto ETF protects investors against these risks as they don't actually own any digital coins.
  • Limited choice. There's currently limited choice available for anyone wanting to invest in cryptocurrency-related ETFs, although this is changing on a monthly basis. The world's most accessible ETF market, the United States, finally approved cryptocurrency-related ETFs in late 2021. It is likely that more ETF options will follow.
  • Volatility. Cryptocurrencies are famous for their volatility and can experience substantial price fluctuations in a short space of time. If the market moves against you, the value of your crypto ETF units could take a sharp dive.
  • Lack of risk diversification. Traditional ETFs often include an extensive range of securities to help achieve diversification. They sometimes include government bonds and debt to mitigate market risk. However, most versions of crypto ETFs only provide access to a limited range of digital currencies.
  • Crypto-specific risks still apply. Just because an investor doesn't have to deal with any of the risks of owning digital currency, that doesn't mean these risks cease to exist. Issues such as hacking will still need to be managed by the ETF provider.
  • Fees apply. On top of an annual management fee, investors will need to consider brokerage fees that apply when buying or selling ETF units.
  • International taxes. If an investor buys ETF units located in another country they need to be aware that foreign tax may apply.

Should you invest in an ETF or real crypto?

Cryptocurrency ETFs are best suited to people who want exposure to cryptocurrency markets, but do not want to or cannot own real cryptocurrency for various reasons.

This is because purchasing cryptocurrency directly, through a specialised cryptocurrency exchange or broker, is more cost-effective than investing via an ETF.

  • In addition to brokerage fees, which are typically higher than cryptocurrency exchanges, financial institutions that operate ETFs charge a management fee. This is usually included in the unit price of the ETF.
  • They can only be traded during market hours – unlike crypto exchanges which operate 24/7. This means that the ETF will always lag behind the market. It can also prevent traders from capitalising on price swings outside market hours.

As such, ETFs are more suited to people looking to implement a long-term buy and hold investment strategy rather than something to actively trade.

By purchasing an ETF instead of actual crypto, investors also miss out on the things that make crypto valuable – such as the option for self-custody, using it for payments and earning interest.

That being said, if an investor wants exposure to cryptocurrency markets without the responsibility of owning the actual coins or dealing with multiple exchanges or wallets, ETFs are a suitable option.

If you want to invest in coins in the hope the price rises, a physically backed ETF is likely what you want. Alternatively, if you are a more experienced investor with a deeper understanding of markets, including futures, you may want to explore a futures-backed ETF.

Lastly, if you are not interested in any specific coins, but are bullish on the sector in general, a stocks-backed ETF could be a great way to diversify your investments across the whole market. Stocks-backed ETFs are also a way for the most die-hard of cryptocurrency investors to diversify their portfolios and gain exposure to sectors such as mining.

Compare cryptocurrency ETFs

1 - 20 of 20
Name Product Symbol Listed on Assets Held Who can invest? Management fee Link
ProShares Bitcoin Strategy ETF
BITO
NYSE (US)
BTC
Anyone
0.65%
View details
21Shares Bitcoin ETF
EBTC
Cboe (AU)
BTC
View details
Cosmos Purpose Bitcoin Access ETF
CBTC
Cboe (AU)
BTC
1.25%
View details
VanEck Bitcoin Strategy ETF
XBTF
Cboe BZX (US)
BTC
Anyone
0.65%
View details
Valkyrie Bitcoin Strategy ETF
BTF
NASDAQ (US)
BTC
Anyone
0.95%
View details
21Shares Ethereum ETF
EETH
Cboe (AU)
ETH
1.49%
View details
Cosmos Global Digital Miners Access ETF
DIGA
Cboe (AU)
Suppliers of BTC
0.65%
View details
Bitcoin Tracker Euro
Bitcoin Tracker Euro
COINXBE
Nasdaq Stockholm (Sweden)
BTC
Anyone
2.5%
View details
Bitcoin Tracker One
Bitcoin Tracker One
COINXBT
NASDAQ (US), Nasdaq Stockholm (Sweden)
BTC
Anyone
2.5%
View details
Evolve Bitcoin ETF
Evolve Bitcoin ETF
EBIT
Toronto Stock Exchange (CA)
BTC
0.75%
View details
3iQ CoinShares Bitcoin ETF
3iQ CoinShares Bitcoin ETF
BTCQ
Toronto Stock Exchange (CA)
BTC
1.00%
View details
BetaShares Crypto Innovators ETF
BetaShares Crypto Innovators ETF
CRYP
ASX (AU)
Suppliers of BTC, ETH miners
0.07%
View details
CI Galaxy Bitcoin ETF
CI Galaxy Bitcoin ETF
BTCX.U
Toronto Stock Exchange (CA)
BTC
0.40%
View details
OKEX OK06ETT
OKEX OK06ETT
OK06ETT
OKEx (SC)
BTC, ETH, BCH, EOS
0.20%
View details
XBT Ether Tracker Euro
XBT Ether Tracker Euro
ETHEREUM XBTE
Nasdaq Stockholm (Sweden)
ETH
2.5%
View details
Coinbase Index Fund
Coinbase Index Fund
CBIFS
Coinbase Pro (US)
BTC, ETH, SOL, ADA
1%
View details
Purpose Bitcoin ETF
Purpose Bitcoin ETF
BTCC
Toronto Stock Exchange (CA)
BTC
1%
View details
XBT Ether Tracker One
XBT Ether Tracker One
ETHEREUM XBT
Toronto Stock Exchange (CA)
ETH
2.5%
View details
3iQ CoinShare Ether Feeder ETF
3iQ CoinShare Ether Feeder ETF
ET3Q
Cboe (AU)
ETH
1.20%
View details
3iQ CoinShares Bitcoin Feeder ETF
3iQ CoinShares Bitcoin Feeder ETF
BT3Q
Cboe (AU)
BTC
1.20%
View details
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Compare up to 4 providers

Find out more about cryptocurrency funds in our 101 guide

How to invest in a cryptocurrency ETF

You essentially have 3 main avenues for investing in a crypto ETF, each with its own pros and cons. Keep in mind various ETFs are spread out over a number of providers, from brokers to privately managed funds. As a result, you will need to consider which markets you have access to and which underlying cryptocurrencies you want exposure to.

Compare online brokers to buy ETFs

1 - 10 of 10
Name Product Standard brokerage fee Inactivity fee Markets International
eToro (global stocks)
US$0
US$10 per month if there’s been no login for 12 months
Global shares, US shares, ETFs
Yes
Zero brokerage share trading on US, Hong Kong and European stocks with trades as low as $50.
Note: This broker offers CFDs which are volatile investment products and most clients lose money trading CFDs with this provider.
Join the world’s biggest social trading network when you trade stocks, commodities and currencies from the one account.
ThinkMarkets Share Trading
$8
No
ASX shares
No
Exclusive: Sign up through Finder and get 3 months of free trading up to 50 trades. Offer available to new customers only.
Following your first three months, enjoy $8 flat fee CHESS sponsored brokerage as well as free live stock data all from the convenience of an easy-to-use mobile app
IG Share Trading
$2.50 for July + August ($5-$8 standard fee applies thereafter)
No
ASX shares, US shares, UK shares, ETFs, and more
Yes
For the months of July and August, trade Aussie shares from $2.50 and international shares from $0. T&Cs apply.
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, plus get access to 24-hour customer support.
Tiger Brokers
$6.49
No
ASX shares, Global shares, Options trading, US shares, ETFs
Yes
Exclusive to Finder: Sign up to Tiger through Finder and on completion of your first deposit of any amount or transfer of shares receive 4 extra free grab shares. T&Cs apply.
Get started with $0 brokerage on ASX and US stocks for the first 3 months upon completion of your first qualifying deposit. Also receive a free Apple share if you deposit $3,000 or more.
SelfWealth (Basic account)
$9.5
No
ASX shares, US shares
Yes
Trade ASX and US shares for a flat fee of $9.50, regardless of the trade size.
New customers receive free access to Community Insights with SelfWealth Premium for the first 90 days. Follow other investors and benchmark your portfolio performance.
CMC Markets Invest
$0
No
ASX shares, Global shares, mFunds, ETFs
Yes
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 35,000 products, including shares, ETFs and managed funds, plus access up to 15 major global and Australian stock exchanges. Plus, buy Aussie shares for $0 brokerage up to $1,000. (Limited to one buy order per stock per trading day).
GO Markets Share Trading
$7.70
No
ASX shares, Forex, CFDs, ETFs
No
Zero brokerage on your first 20 trades
Trade 2,500 ASX listed shares from desktop or mobile and enjoy $0 brokerage on your first 20 trades, $7.70 trades after.
Saxo Capital Markets (Classic account)
$5
No
ASX shares, Global shares, ETFs
Yes
Access 22,000+ stocks on 50+ exchanges worldwide
Low fees for Australian and global share trading, no inactivity fees, low currency conversion fee and optimised for mobile.
Bell Direct Share Trading
$15
No
ASX shares, mFunds, ETFs
No
Invest in Australian shares, options and managed funds from the one account with no inactivity fee.
Bell Direct offers a one-second placement guarantee on market-to-limit ASX orders or your trade is free, plus enjoy extensive free research reports from top financial experts.
Superhero share trading
$5
No
ASX shares, US shares, ETFs
Yes
Sign up & fund your account with A$100 or more and receive US$10 of Tesla stocks on Superhero. T&Cs apply.
Enjoy $0 brokerage on US stocks and buying ETFs as well as a flat $5 fee to trade Australian shares.
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Compare up to 4 providers

Important: Share trading can be financially risky and the value of your investment can go down as well as up. Standard brokerage is the cost to purchase $1,000 or less of equities without any qualifications or special eligibility. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.

Other ways to invest in cryptocurrency without buying coins

There are several other ways to invest in cryptocurrency without purchasing the actual coins and tokens.

CFDs

Contracts for difference (CFDs) are a popular way of investing in almost any asset, as they simply track the price of the underlying asset, rather than representing ownership. CFDs allow investors to go long or short, with many CFD platforms also offering leverage.

Where to trade cryptocurrency CFDs

Futures and options

Futures contracts and options contracts track the price of an underlying asset, such as Bitcoin or Ethereum. These contracts are typically used to speculate on the future price of an asset. As such, they are better utilised in the hands of experienced traders rather than novice investors.

How to trade cryptocurrency futures

Stocks

There is a wide range of publicly traded companies with exposure to cryptocurrencies. These range from dedicated services such as cryptocurrency exchanges and mining companies, to investment funds, right through to loosely affiliated companies that use blockchain technology or have part of their treasury in cryptocurrencies.

Some of the more popular cryptocurrency stocks that are also included in stock-based ETFs include:

  • Coinbase (cryptocurrency exchange)
  • Robinhood (trading platform)
  • Galaxy Digital (hedge fund)
  • Riot Blockchain (cryptocurrency mining)
  • Hut 8 (cryptocurrency mining)
  • MicroStrategy (holds a portion of its treasury in Bitcoin)
  • Tesla (holds a portion of its treasury in Bitcoin)

Frequently asked questions


Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

Disclosure: At the time of writing the author holds ADA, ICX, IOTA and XLM.

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