With over AU$1.6 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 nearly 2/3rds of its value since it’s peak in late 2021, 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 currently eight ETFs in Australia available for investors to gain exposure to crypto. Last year, Cosmos Asset Management delisted three of their ETFs (DIGA, CBTC and CPET).
|Ticker Code||ETF Name||Exposure||Exchange|
|CRYP||BetaShares Crypto Innovators ETF||Cryptocurrency companies||ASX|
|EBTC||ETFS 21Shares Bitcoin ETF||Bitcoin||Cboe Australia|
|BT3Q||3iQ CoinShares Bitcoin Feeder ETF||Bitcoin||Cboe Australia|
|EETH||ETFS 21Shares Ethereum 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
CRYP was launched in late 2021 and has since become the largest crypto ETF, by size, with $35 million. It broke the record for the fastest Australian ETF to reach $100 million from investors, achieving that milestone four days after launching. The remaining cryptocurrencies have only recently launched and have struggled to gain traction since with EBTC gathering $5.7 million in assets. This is mainly due to a challenging environment for crypto in 2022, with both central bank tightening and Sam Bankman-Fried’s FTX collapse severely impacting crypto interest and prices.
Costs and slippage
CRYP is the lowest cost crypto ETF with a management fee of 0.67% p.a. and spreads of 0.49%. 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.
For the ETFs tracking the underlying cryptocurrency, ET3Q has the lowest spreads of 0.23% while BT3Q is at 0.41%.
|TICKER CODE||MANAGEMENT FEE||BUY/SELL SPREADS (SLIPPAGE)|
CRYP is the most liquid crypto ETF, trading almost $266,000 in average daily volume.. By comparison, some of the most popular global share ETFs trade up to $10 million daily.
From the newer cryptocurrency ETFs, EBTC has the highest liquidity at $31,000 per day followed by EETH at $9,000 per day. BT3Q and ET3Q have not had any volume traded in the December 2022 period. We expect these ETFs have experienced muted liquidity due to less demand in cryptocurrency spurred by the recent fall in price and broader industry contagion.
Returns and track record
As CRYP only recently launched, it does not have a long-standing track record to adequately measure performance. Since it’s launching, CRYP has fallen ~87%.
ETFs tracking cryptocurrencies have only recently launched too but have had a rocky start to their ETF life. They fell by up to 45% in the 2nd half of 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||-63.6%||20.0%||N/A|
|EBTC||CryptoCompare’s Crypto Coin Comparison Aggregated Index (Bitcoin)||April 2014||May 2022||-38.7%||33.1%||N/A|
|BT3Q||MVIS CryptoCompare Bitcoin Benchmark Rate Index (BBR)||June 2020||June 2022||-39.0%||N/A||N/A|
|EETH||CryptoCompare’s Crypto Coin Comparison Aggregated Index (Ethereum)||April 2014||May 2022||-39.4%||103.3%||N/A|
|ET3Q||MVIS CryptoCompare Ethereum Benchmark Rate Index (EBR)||March 2021||June 2022||-39.1%||N/A||N/A|
Exposure and holdings
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%|
|Maximum single stock exposure||10%|
|Weighting methodology||Market capitalisation and equal weighting|
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|
|BT3Q||Via the Canadian-listed 3iQ CoinShares Bitcoin ETF||USD|
|EETH||Ethereum entitlement via Coinbase cold storage||AUD|
|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. CRYP gives exposure to companies involved in the crypto market and have similar underlying holdings. CRYP provides more diversification by allowing non-pure play companies.
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.