The State of Crypto ETFs in 2023

Year-to-date, bitcoin prices are up 72.7%, and crypto ETFs like the Valkyrie Bitcoin Miners ETF (WGMI) are also impressively up 128.9%. WMGI is currently the highest-performing equity ETF YTD, while the remaining top 10 ETFs are all also crypto-related ETFs. This outperformance has been catching investor interest, but flows haven’t been matching up. WGMI has only $5.7 million in net inflows this year, which places it at 647 out of 1,969 equity ETFs — just barely in the top third.

Some investors may still be reluctant to invest in crypto despite bitcoin prices rising back to near the $30,000 level, while some long-term crypto fans are still adding to their crypto allocations. Even for those that aren’t huge believers in the crypto industry, crypto ETFs can be a simple, familiar way to invest in a high-reward/high-risk portion of a market — which may fit into many investor portfolios in small allocations of 1%–5%. This note looks at a brief history of crypto ETFs, including what ETFs are currently available while explaining some of the key differences between the different types of crypto ETFs.

What Crypto ETFs Currently Exist?

Before I describe the different types of crypto ETFs, it is useful to look at the crypto ETF industry timeline.

The Ark Next Generation Internet ETF (ARKW), which holds the Grayscale Bitcoin Trust (GBTC) and Coinbase Global (COIN) as its largest holdings, can be traced back to its inception in September 2014. Back then, the ETF was called the ARK Web x.0 with top holdings like LinkedIn (eventually acquired by Microsoft (MSFT), Netflix (NFLX), and Amazon (AMZN).