First ‘crypto’ ETF in US eclipses $100M mark

The first US ETF allowed to have “crypto” in its name has crossed $100 million in assets under management a little over two years after its debut. 

Investors have been increasingly participating in crypto equity offerings in recent years due to the Securities and Exchange Commission’s (SEC) continued delay in approving a spot bitcoin ETF.

Bitwise Asset Management’s Crypto Industry Innovators ETF (BITQ) became the first US ETF to have “crypto” in its name when it launched in May 2021. It now manages roughly $108 million in assets, reaching that milestone before other “crypto” ETFs by fund giants who followed suit.

The SEC’s Investment Company Act of 1940 requires a fund to invest at least 80% of its assets in the type of investment suggested by its name.

“It was the first ETF with crypto in its name, and that’s not because other ETFs I think didn’t want to have crypto in their name,” Bitwise Chief Investment Officer Matt Hougan told Blockworks in 2021.

Rather, he added at the time, it was the way Bitwise designed the fund.

Complying with the SEC’s rule, at least 85% of BITQ’s holdings are “pure-play” firms, which derive more than 75% of their revenue from crypto-related businesses, according to the firm. Up to 15% of holdings are other companies making “meaningful investments” in the space.

BITQ’s top five holdings are Riot Platforms, MicroStrategy, Coinbase, Hive Digital Technologies and Hut 8 Mining. 

Four other fund issuers have launched US ETFs with “crypto” in the title since, including financial behemoths Fidelity, Schwab and Invesco. 

The Fidelity Crypto Industry and Digital Payments ETF (FDIG), which came to market in April 2022, has $46 million in assets, according to VettaFi data. 

The Schwab Crypto Thematic ETF (STCE) and the Invesco Alerian Galaxy Crypto Economy ETF (SATO) have just $13 million and $5 million in assets, respectively. The First Trust SkyBridge Crypto Industry and Digital Economy ETF (CRPT) manages about $25 million.

From an assets undermanagement standpoint, BITQ is still far behind Amplify’s Transformational Data Sharing ETF (BLOK), which despite its name is marketed as a blockchain-focused fund that holds crypto stocks. 

BLOK’s largest holding is MicroStrategy — the largest publicly traded holder of bitcoin — followed by bitcoin miner Marathon Digital and Coinbase. 

Some investors seeking exposure to the crypto space have allocated to these equity ETFs in the absence of a US spot bitcoin ETF — a fund that the SEC has not yet greenlit despite roughly 10 years of applications from a range of fund issuers. 

Asset manager BlackRock revealed a bid to launch a spot bitcoin ETF last month. Industry watchers said a US spot bitcoin product, if approved, could be one of the biggest ETF launches in history. 

A bunch of crypto and blockchain equity ETFs have outperformed bitcoin so far this year, bitcoin mining stocks and others have seen big year-to-date jumps. 

BITQ was up about 204% year to date, as of Thursday morning, while bitcoin’s price is up about 85% in that span. 

BLOK has lagged bitcoin’s performance slightly so far in 2023, up about 71%.

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