With over AU$1 trillion worth of cryptocurrency (crypto) assets in circulation, bitcoin and cryptocurrency generally are becoming a fast-growing asset class that is attracting investors.
Coinciding with the cryptocurrency market losing 2/3rds of its value over the last quarter, there has been the rise of exchange traded funds (ETFs) listed in Australia that gives exposure to crypto such as Bitcoin or Ethereum.
There are eight ETFs in Australia available for investors to gain exposure to crypto
|Ticker Code||ETF Name||Exposure||Exchange|
|CRYP||BetaShares Crypto Innovators ETF||Cryptocurrency companies||ASX|
|DIGA||Cosmos Global Digital Miners Access ETF||Cryptocurrency companies||Cboe Australia|
|EBTC||ETFS 21Shares Bitcoin ETF||Bitcoin||Cboe Australia|
|CBTC||Cosmos Purpose Bitcoin Access ETF||Bitcoin||Cboe Australia|
|BT3Q||3iQ CoinShares Bitcoin Feeder ETF||Bitcoin||Cboe Australia|
|EETH||ETFS 21Shares Ethereum ETF||Ethereum||Cboe Australia|
|CPET||Cosmos Purpose Ethereum Access ETF||Ethereum||Cboe Australia|
|ET3Q||3iQ CoinShares Ether Feeder ETF||Ethereum||Cboe Australia|
Stockspot reviews and compares more than 250 ETFs in our annual Stockspot ETF Report. In this article, we road test the best cryptocurrency ETFs in Australia across a range of different metrics to provide our analysis on the most suitable choice for investors.
- Costs and slippage
- Returns and track record
- Exposure and holdings
- Verdict and conclusion
Both CRYP and DIGA were launched in late 2021. Since then, CRYP has become the largest crypto ETF, by size, with $48 million. It broke the record for the fastest Australian ETF to reach $100 million from investors, achieving that milestone four days after launching. DIGA has struggled to gain traction, only attracting $2 million to date. The remaining cryptocurrencies have only recently launched and have struggled to gain traction since with EBTC gathering $4 million in assets.
Costs and slippage
CRYP is the lowest cost crypto ETF with a management fee of 0.67% p.a. DIGA is more expensive, charging 0.90% p.a. The crypto ETFs launched by 3iQ tracking Bitcoin and Ethereum are the cheapest direct exposure at 1.20% p.a. while other ETFs charge 1.25% p.a.
The spreads of DIGA are a whopping 2.37% due to its limited trading volume, the nature of the portfolio having high turnover (i.e. more actively managed) and less liquidity, and the number of market makers, whereas CRYP’s spreads are more contained at 0.52%.
For the ETFs tracking the underlying cryptocurrency, CPET has the lowest spreads of 0.24% while ET3Q and BT3Q are at 0.28% and 0.31% respectively.
|TICKER CODE||MANAGEMENT FEE||BUY/SELL SPREADS (SLIPPAGE)|
CRYP is the most liquid crypto ETF, trading almost $800,000 in average daily volume. DIGA has limited liquidity only trading around $5,000 daily. By comparison, some of the most popular global share ETFs trade up to $13 million daily.
From the newer cryptocurrency ETFs, EBTC has the highest liquidity at $114,000 per day followed by EETH at $77,000. We expect these ETFs have experienced muted liquidity in their first couple of months due to less demand in cryptocurrency spurred by the recent fall in price.
Returns and track record
As both CRYP and DIGA only recently launched, they do not have a long-standing track record to adequately measure performance. Since their launching, CRYP has fallen ~80% while DIGA has fallen ~86%.
ETFs tracking cryptocurrencies have only recently launched too but have had a rocky start to their ETF life. They fell by up to 44% in June 2022 alone.
Research shows that new ETFs often launch just as retail interest is peaking and before a period of poor returns. We spoke to the AFR about this phenomenon just as these crypto currency ETFs were launching and they seem to be following this pattern. This is one reason that we avoid niche thematic ETFs for clients as they are launching.
While some cryptocurrencies have had meaningful gains historically, they can also go through periods of large and severe price declines (such as 2011, 2015, 2018 and early 2022).
|Ticker CODE||INDEX||Index Inception||ETF inception||Index 1 Year Return||Index 3 Year Return (p.a.)||Index 5 Year Return (p.a.)|
|CRYP||Bitwise Crypto Innovators Index||December 2019||November 2021||-73.6%||N/A||N/A|
|DIGA||Global Digital Miners Access Index||July 2021||October 2021||N/A||N/A||N/A|
|EBTC||CryptoCompare’s Crypto Coin Comparison Aggregated Index (Bitcoin)||April 2014||May 2022||-39.7%||18.5%||N/A|
|CBTC||CoinDesk XBX Index||April 2014||May 2022||-44.8%||29.7%||153.1%|
|BT3Q||MVIS CryptoCompare Bitcoin Benchmark Rate Index (BBR)||June 2020||June 2022||-33.3%||N/A||N/A|
|EETH||CryptoCompare’s Crypto Coin Comparison Aggregated Index (Ethereum)||April 2014||May 2022||-47.3%||51.0%||N/A|
|CPET||CoinDesk TradeBlock ETX Index||February 2018||May 2022||-38.2%||88.2%||48.4%|
|ET3Q||MVIS CryptoCompare Ethereum Benchmark Rate Index (EBR)||March 2021||June 2022||-31.3%||N/A||N/A|
Exposure and holdings
While both CRYP and DIGA track crypto companies, the way they select these companies differ.
CRYP holds 27 companies, with the top 10 making up 76% of the ETF. It splits its holdings across two company tiers.
Tier 1 (comprising 85% of the ETF) are pure-play cryptocurrency companies that derive at least 75% of their revenue from servicing the crypto market (e.g. mining, equipment, financial services.) and have at least 75% of their assets in cryptocurrencies such as Bitcoin or Ethereum.
Tier 2 (comprising 15% of the ETF) are supporting companies with at least one dedicated initiative focused on the crypto system such as purchasing, selling, custody, mining, trading, and transaction processing.
This second tier means CRYP may hold companies not normally associated with crypto such as PayPal, Square, and NVIDIA. CRYP is mainly concentrated in Northern America (~80% of the portfolio) but does have some exposure to Germany, China, Singapore, and Japan.
|Weighting in top 10 holdings||76%||92%|
|Maximum single stock exposure||10%||15%|
|Weighting methodology||Market capitalisation and equal weighting||Market capitalisation|
DIGA holds only 20 companies with the top 10 making up 92% of the ETF, meaning it is much more concentrated and less diversified. It is much more actively managed with their investment committee meeting every fortnight and potentially changing the holdings monthly. DIGA holds companies that have at least 80% of their revenues generated from sectors such as blockchain technology and digital mining infrastructure. DIGA has more geographical diversification with a larger exposure in China and the UK but is still heavily skewed towards North America (~80% of the portfolio.)
There is a large overlap of holdings between CRYP and DIGA with CRYP holding 77% of the companies in DIGA. Notable exceptions in underlying companies are CRYP holding Coinbase and MicroStrategy, which DIGA has no exposure to.
For the pure cryptocurrency ETFs tracking the price of Bitcoin and Ethereum, their exposure differ in the underlying holdings and currency.
|EBTC||Bitcoin entitlement via Coinbase cold storage||AUD|
|CBTC||Via the Canadian-listed Purpose Bitcoin ETF||USD|
|BT3Q||Via the Canadian-listed 3iQ CoinShares Bitcoin ETF||USD|
|EETH||Ethereum entitlement via Coinbase cold storage||AUD|
|CPET||Via the Canadian-listed Purpose Bitcoin ETF||USD|
|ET3Q||Via the Canadian-listed 3iQ CoinShares Ether ETF||USD|
Verdict and conclusion
Whether you want to invest in a pure underlying cryptocurrency or a more holistic cryptocurrency industry will depend on your personal preferences.
Investors shouldn’t expect these ETFs to mimic the price movements of the underlying digital currencies, and therefore may see some difference in returns. Unlike other markets like gold miners, the crypto market is not yet mature and there are only a limited number of publicly-traded companies in the world. Many of the larger cryptocurrency exchanges are still privately owned businesses while the listed companies are relatively small in size. Both CRYP and DIGA give exposure to companies involved in the crypto market and have similar underlying holdings. CRYP provides more diversification by allowing non-pure play companies, compared to DIGA which is solely focused on crypto players.
For the underlying cryptocurrencies, investors need to determine if they want to gain access to crypto via a “feeder fund” that invests in an already existing overseas ETF (such as Canada) or own the underlying asset via a custodial cold storage wallet. For unhedged exposure, EBTC and EETH track the cryptocurrency in AUD, but you may wish to look at the USD alternative depending on your preference for a hedged or unhedged vehicle.
High-octane, and therefore highly speculative, investments like crypto ETFs can be the extra hot sauce in your portfolio to juice up returns, but can sometimes leave investors burnt if they invest too much. Our 2022 ETF Report showed how investors in niche thematic ETFs lost over $100m in one year. We recommend that if you want to invest in cryptocurrency, it should only account for a small part of your portfolio, with the majority of your money invested in a low-cost diversified strategy like the portfolios we offer at Stockspot.