If you're looking to broaden your exposure to the crypto industry, the growing number of crypto-themed exchange-traded funds (ETFs) can help to diversify your portfolio. Some of these invest in cryptocurrencies such as Bitcoin (BTC 0.18%), while others invest in tech companies with direct exposure to the crypto industry.
Just remember -- it's always important to peek under the hood to see what these ETFs are actually holding. You might be surprised to find out, for example, that not all Bitcoin ETFs are created equal. Some of them hold Bitcoin directly, while others rely on financial derivatives to track the price of Bitcoin. With that in mind, here are three crypto ETFs to buy in June.
The best spot Bitcoin ETF
Although there are currently nearly a dozen spot Bitcoin ETFs to choose from, the one that has my attention is the iShares Bitcoin Trust (IBIT +0.91%). It's managed by BlackRock (BLK +0.00%), the world's largest asset manager.
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Since its launch in early January, the iShares Bitcoin ETF has quickly become the most popular of the new spot Bitcoin ETFs, with more than $17 billion in assets under management. When analysts speak about the influx of new investor money into the spot Bitcoin ETFs, it's the one that is typically used as a benchmark of investor sentiment. At one point in late April, the iShares Bitcoin Trust had a 71-day streak of net investor inflows, and that became a symbol of just how much untapped demand there could be for Bitcoin.
CRYPTO: BTC
Key Data Points
This ETF does nothing except track the price of Bitcoin -- its only investment holding. Thus, if you do not want to buy Bitcoin directly, you can hold this ETF instead. This makes it a perfect investment for the first-time crypto investor, and a great way to invest in Bitcoin passively for the long haul.
Given that all of the new spot Bitcoin ETFs do nothing but hold Bitcoin, it's difficult to find any meaningful points of differentiation between them. That said, the iShares Bitcoin Trust does carry slightly higher management fees (0.25%) than the lowest-cost option (0.20%). But if you are buying and holding for the long haul, the impact of that difference should be negligible.
Two crypto stock ETFs
If you are looking to track the broader performance of the crypto and blockchain industry, there are several good options. Two that stand out are the Amplify Transformational Data Sharing ETF (BLOK +0.56%) and the First Trust SkyBridge Crypto Industry and Digital Economy ETF (CRPT +1.33%).
Both hold diversified baskets of crypto stocks, but the difference between them is actually quite profound, even though they largely hold the same companies. For example, the Amplify Transformational ETF does not have a single holding that accounts for more than 5% of the portfolio's value. Its risk is well distributed across more than 50 holdings.
In contrast, the First Trust SkyBridge ETF has two holdings -- MicroStrategy (MSTR 0.07%) and Coinbase Global (COIN +1.09%) -- that each account for nearly 20% of the total portfolio. It also has 10% weightings for two different Bitcoin miners, and another 10% weighting for Galaxy Digital Holdings (GLXY +0.00%). So just five companies account for 70% of the portfolio -- a much more concentrated degree of risk.
The differences in their approaches have had profound impacts on their performances. The Amplify Transformational ETF is up 20% year to date, and 65% during the past 12 months. The First Trust SkyBridge ETF is up 40% year to date, and 146% over the past 12 months.
Obviously, if you are only looking at short-term performance, the no-brainer choice would be to pick the ETF that's delivering superior near-term returns. But if you are more risk averse and have a longer-term time horizon, you might prefer to spread your bets over a wider mix of companies.
New ETFs to watch out for
Though you can't buy into them now, the new spot Ethereum ETFs are worth a quick mention. They were approved by the Securities and Exchange Commission at the end of May, and have not yet started trading. When they do, they will function as an easy way to invest in Ethereum (just as the spot Bitcoin ETFs do with that crypto). As such, they should be on your watch list.
The primary benefit of any ETF is easy portfolio diversification. So if you are new to crypto or are simply looking for crypto exposure within a more traditional portfolio, any of these ETFs could provide what you're looking for.
