Cryptocurrency ETFs and ETFs with exposure to crypto (e.g. crypto mining companies, companies that hold cryptocurrencies) are the 10th most popular ETF theme this year, attracting over $550 million. While many sceptics thought 2022 would be the end of the crypto fad, the theme is still going strong amid geopolitical unrest and with more institutions embracing digital assets.
The total cryptocurrency market cap currently stands at $2.14 trillion (as of March 30th, 2022), up by 50% since it reached $1.5 trillion in late January. The crypto market fear and greed index, which depicts the market sentiment for the cryptocurrencies has shifted from "extreme fear" to "greed" over the past month, signalling optimism in the crypto space.
Bitcoin remains the largest cryptocurrency by market cap ($898 billion), followed by Ethereum ($407 billion), stablecoin Tether ($81.71 billion), Binance Coin ($72.1 billion), and stablecoin USD coin ($51.92 billion).
Institutions increasingly adopt cryptocurrenciesInstitutions have been key in the crypto rally, with increased interest and adoption. Cointelegraph reported BlackRock CEO Larry Fink said the Russia-Ukraine war could prompt nations to reevaluate their currency dependencies, potentially accelerating the adoption of digital assets. Specifically, the BlackRock CEO touted cryptocurrencies as a viable tool for international settlements and transactions. Last year, institutional investors traded $1.14 trillion worth of crypto via Coinbase alone — nearly ten times as much as in 2020, and more than twice the $535 billion for retail (coinbase.com).
In regulatory news, President Biden released on March 9th, 2022, the Executive Order on Ensuring Responsible Development of Digital Assets, which outlines the Biden-Harris administration’s first official response to the digital assets industry. The executive order highlights the deficiencies in digital assets regulations. The order directs federal government departments and agencies, working in collaboration, to produce various reports, frameworks, analyses, and regulatory and legislative recommendations to the administration.
10 most popular Crypto ETFs in AmericaThe following America-domiciled Crypto ETFs (or Crypto exposure ETFs) witnessed the most net inflows this year:
The Purpose Bitcoin ETF is the world's first exchange-traded fund backed by physically settled Bitcoin – launched on February 17th, 2021. The fund has a total management expense ratio of 1.49% and trades primarily on the Toronto Stock Exchange. As of March 29th, 2022, BTCC holds over 35,490 Bitcoins.
ProShares Bitcoin Strategy ETF or BITO is the first Bitcoin-linked ETF to hit the U.S. markets. Unlike BTCC, BITO provides exposure to Bitcoin futures contracts. The fund's launch was an instant success with almost off-the-charts demand and ranking as the second heaviest-traded ETF debut on record. The fund has a total expense ratio of 0.95% and trades primarily on the NYSE Arca.
Distaste for Internet ETFs (excluding China focus) remains strong this year as the ETF theme saw a gush of net outflows amounting to $1.7 billion and an average share price loss of -15%. The U.S. Federal Reserve's recent stance to fend off inflation with rake hikes has worried tech investors about a possible reversal of the impressive bull run the sector has witnessed over the past few years.
Tech-heavy indices have fallen this year with the Nasdaq-100 for example, losing 8% of its value YTD. Meanwhile, the Nasdaq CTA Internet Index designed to track the performance of the largest and most liquid U.S.-listed companies engaged in internet-related businesses has fallen by -19% over the same period.
Other issues weighing on these internet stocks are the Russia- Ukraine war and the exodus of hundreds of companies from Russia, not to mention the possible back and forth sanctions with China, or the rise of stringent internet regulations in Europe.
This outflow trend that touched ETFs with exposure to US or European internet stocks is very different from the one seen in ETFs that invest in Chinese Internet stocks. To put things into perspective, the KraneShares CSI China Internet ETF (KWEB) remains one of the most popular thematic ETFs today despite its poor performance. Year-to-date, investors added $1.4 billion to KWEB, and remain indifferent to the ongoing Chinese crackdown on the domestic tech and internet industries.
American investors: How to invest in Internet ETFsInvestors who see the dip as a buying opportunity can explore the following ETFs: (not investment advice)
FDN is the largest internet ETF stock in the group with $7.1 billion in assets under management. The fund seeks to track the Dow Jones Internet Composite Index and invests in the largest and most actively traded stocks of U.S. companies in the Internet industry.
As of March 29th, 2022, the fund's holdings are spread across the information technology sector (44.8%), communication services (30.4%), consumer discretionary (18.8%), healthcare (3.58%) and real estate (2.31%). The portfolio's 42 holdings include Amazon.com Inc. (9.8%), Meta Platforms Inc. (6.7%), Alphabet Inc. Class A (4.95%), Alphabet Inc. Class C (4.59%), and Salesforce.com inc. (4.58%) – to mention a few. FDN has a total expense ratio of 0.51% and trades primarily on the NYSE Arca. This year, FDN's share price dropped by -14%.