On this episode of the “ETF of the Week” podcast, VettaFi’s head of research, Todd Rosenbluth, discussed the CoinShares Valkyrie Bitcoin Miners ETF (WGMI) with Chuck Jaffe of Money Life. The pair discussed several topics related to the fund to give investors a deeper understanding of the ETF overall.

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Chuck Jaffe: One fund, on point for today. The expert to talk about it. Welcome to the ETF of the Week!

Yes, this is the ETF of the Week, where we examine trending, new, newsworthy, unique and intriguing exchange traded funds with Todd Rosenbluth, the head of research at VettaFi. And at VettaFi.com, you’ll find all the tools you need to be a savvy and smart investor in ETFs.

By the way, VettaFi is the organizer of Exchange. It’s the largest ETF conference that’s geared towards financial advisors. It’s being held March 23 through March the 26 in Las Vegas. And if you stay tuned after Todd and I finish up here, well, there’s a short message with more information for you about Exchange.

Todd Rosenbluth. It’s great to chat with you again!

Todd Rosenbluth: It’s great to be back!

Chuck Jaffe: Your ETF of the Week is…

Todd Rosenbluth: The CoinShares Valkyrie Bitcoin Miners ETF (WGMI).

Chuck Jaffe: WGMI, the CoinShares Valkyrie Bitcoin Miners ETF. Wow, interesting pick, Todd. Because we have to learn a little bit about how this fund is going to be used. But also, I’ll point out and we’ll talk more about it in a moment, interesting timing on this. So, this fund — bitcoin miners versus, well they’re not physical bitcoins, but bitcoin funds. Why are you going in this direction now?

Todd Rosenbluth: Well, I remember, about a year ago, we talked about the first spot bitcoin ETFs that came to market. And they were tremendously successful. They performed well. They gathered assets.

We skipped past the bitcoin mining space. And I regret that we did so. This is an equity ETF that holds companies that are supportive of bitcoin and the cryptocurrency ecosystem.

What we’re hearing from advisors at VettaFi is that they want exposure to the crypto space and to bitcoin. But they prefer an equity vehicle. In fact, either they can’t invest directly in a bitcoin ETF, it’s not approved on their platform, or they just feel more comfortable getting exposure to the equity marketplace. And so, this CoinShares ETF gives them the ability to do so.

It’s actively managed. It’s diversified. It gives you exposure to a number of companies you don’t otherwise have within your broader portfolio that are outside of the main indices. And yes, we’ll come into the timing of it. But this has certainly been a year of crypto in focus and bitcoin in focus under the new presidential administration. It’s been more volatile this year, on the way down as opposed to just on the way up.

But we think now is a good time for folks to be considering this equity ETF.

Chuck Jaffe: The irony is that this fund is down about 12/13/15% as we talk about it, year to date. But in 2023, this fund was up 304%. And by the way, in the digital assets category, that didn’t make it all the way to the top. That just made it the top 5%.

So, if you’re looking at the miners versus holding the crypto and the crypto funds, and as you pointed out, for some companies or some investors, it’s how they want to invest, because they don’t want to hold the digital asset or they can’t hold the digital asset.

But do you expect that bitcoin miners to bitcoin would be the way gold miners are to gold?

Todd Rosenbluth: I think of it that way. It’s equity exposure that’s connected to the underlying asset; in this case, bitcoin as opposed to gold. This is a more volatile investment than most of folks’ equity exposure. You mentioned how strong it performed a couple of years ago. And it’s down to start this year. There’s going to be volatility.

We’ll talk through perhaps how this can fit into a risk-on oriented portfolio. But yes, if you think about the ecosystem and what is needed for more bitcoin, we need mining for that. And again, I’m not going to get technical. I can’t get technical. I think this is just now a good time to take a closer look.

And yes, it has performed very well until it’s pulled back. Is now a buying opportunity? Should you wait a little bit more? I’m not sure about that. I’m not going to make a tactical, short-term call on this, other than this is an ETF that should be on the radar for many investors.

Chuck Jaffe: Gold versus gold miners both perform like gold. They have different characteristics. And there are different reasons you want to own the miners versus the precious metal.

But in this case, given what you were saying about some money managers not being able to invest in crypto, but wanting to do this, is this play a bit like saying, “I don’t want the AI companies, I want to be AI-adjacent. I don’t want the crypto. I want to be crypto-adjacent. So, rather than owning the metal, rather than being the one who’s pursuing the physical, or the sort of physical in the case of a bitcoin asset, I want to be providing picks and shovels.”

So you’re investing in the picks and shovels companies? Is this that kind of a play, the way some people are currently saying, you want AI but you don’t want to get in with the real volatility? Go after the companies that are adjacent, the power providers and the rest?

Todd Rosenbluth: For folks that are going to consider this ETF, and I think it’s worthy of consideration, you have to believe that there’s going to be greater adoption for bitcoin. The use case is going to go up. The environment is going to be more favorable from a regulatory standpoint. All those things are catalysts for the bitcoin mining space, not just bitcoin itself.

What you get is companies. Actual companies that are behind this, that have revenue, that have hopefully earnings that you can do valuation on as opposed to bitcoin itself, which is going to be a little harder to do. And what we’re finding is some folks are thinking of this as they should as a thematic ETF. And we’ve talked about some other thematic ETFs. You mentioned artificial intelligence. There’s robotics, there’s healthcare technology, clean energy, what have you.

This is a thematic ETF that could go into the growth part of your equity portfolio, be a slice of it, obviously getting the benefits of diversification, not not only within the ETF, WGMI, but within your broader portfolio. Because that level of volatility that you talked about is probably too much to have a significant stake in one thematic strategy.

Chuck Jaffe: Given where you think it fits into a portfolio, but also, let’s take it away from those folks who are going to be buying it because they can’t own crypto. Would you own this fund, looking at bitcoin miners, along with or aside from a bitcoin fund?

Todd Rosenbluth: If you pulled up the Grayscale Bitcoin Trust ETF (GBTC), which has a long enough history, more than just over a year, you’d be able to see the differences behind the ETF that is tied to bitcoin and the bitcoin mining space. And I would again equate it to what we see with gold and gold mining.

But bitcoin in general can be a diversifier within a portfolio the same way that this can. But this is going to perform much more like an equities strategy, a risk-on equity strategy than bitcoin itself. There are connections, but it isn’t equal in parity from one another.

Chuck Jaffe: That being the case, and you’ve made it clear this is not a timing play. But if you look at the 200-day moving average. Well, for the last year, this fund, WGMI, CoinShares Valkyrie Bitcoin Miners, has been above its 200-day moving average almost all the time. Until about a week before we recorded this, at which point it got hammered and is now well below its 200-day moving average.

So you said this might be a buying opportunity. As it gets knocked down, maybe it’s a chance to get in at a bit of a discount. At the same point, with something like this, do you like to layer on? I know you’re not necessarily a trend follower, but you have conflicting signals.

Todd Rosenbluth: Yes, you do. And again, I’m not a trend follower. If you believe in trend-following as part of your approach to investing, then maybe you want to wait on this, if the signals are not supportive. But if you believe in cryptocurrency, if you believe in bitcoin, if you believe that the growth is still there.

We’ve seen fourfold growth in the last four years — not the price, but the amount of money that tied to this industry growing fourfold. If you believe in that long-term approach, then this ETF, WGMI, is worth having on your radar. It’s OK to buy something that’s selling at a discount if you have confidence in the longer-term fundamentals.

Chuck Jaffe: And in this case, the confidence is placed in the CoinShares Valkyrie Bitcoin Miners ETF, WGMI, the ETF of the Week from Todd Rosenbluth at VettaFi. Todd, great stuff, as always. See you again next week!

Todd Rosenbluth: I’ll see you next week, Chuck.

Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And I am Chuck Jaffe, and I’d love it if you check out my hour-long weekday show at MoneyLifeShow.com, or by searching for it wherever you find great podcasts.

If you’re searching for information on your next great ETF, look no further than VettaFi, where they have all the tools you need at VettaFi.com to help yourself out and make yourself a better investor.

They are on X at @Vetta_Fi, and Todd Rosenbluth, head of research and my guest. he’s on X too, at @ToddRosenbluth.

The ETF of the Week is here for you every Thursday. Make sure you don’t miss an episode by following along on your favorite podcast app. We’ll be back with another great ETF to talk about with you next week.

But until then, happy investing everybody!

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