The world of cryptocurrency can feel overwhelming, with wallets, private keys, and volatile prices making it difficult for everyday investors to participate confidently. Crypto ETFs offer a simpler solution, allowing you to gain exposure to cryptocurrencies without going through the hustle of buying the actual cryptocurrencies.
In this guide, we explain what crypto ETFs are, how they work, and how you can trade them safely and effectively.
- What are crypto ETFs?
- How crypto ETFs work
- History of crypto ETFs
- How to trade crypto ETFs
- The major Crypto ETFs you can invest in
- Benefits of investing in crypto ETFs
- Risks and limitations of investing in Crypto ETFs
- Comparing crypto ETFs and direct crypto investments
- Considerations you should make when investing in crypto ETFs
- Alternatives to crypto ETFs
- Common misconceptions about crypto ETFs
- Conclusion
- Frequently asked questions (FAQs)
What are crypto ETFs?
A crypto ETF is an exchange-traded fund (ETF) that holds cryptocurrencies, and they are traded on stock exchanges just like regular stocks.
In essence, a crypto ETF lets you gain exposure to cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), Hedera (HBAR), Litecoin (LTC) or XRP without owning them directly. Instead of buying digital coins and worrying about wallets or security, you can trade the ETFs on a traditional stock exchange.
How crypto ETFs work
Crypto ETFs operate similarly to traditional ETFs: they pool investors’ money to buy assets and issue shares that reflect the value of those holdings.
There are several types of crypto ETFs:
1. Spot crypto ETFs
These ETFs directly own the underlying cryptocurrency. For example, a spot Bitcoin ETF buys bitcoins and stores them securely on behalf of investors. The ETF share price mirrors the market price of Bitcoin (BTC), giving investors direct exposure without owning the coins themselves.
2. Futures crypto ETFs
Instead of holding crypto directly, these ETFs track the price via futures contracts, which are agreements to buy or sell a cryptocurrency at a set price in the future.
Futures ETFs let investors speculate on crypto price movements without holding the actual asset, but they may experience tracking errors due to contract rollovers.
3. Inverse and leveraged ETFs
Inverse ETFs profit when the underlying asset declines, while leveraged ETFs amplify daily gains or losses. These are generally high-risk instruments, suited for short-term strategies rather than long-term holding.
4. Blockchain and crypto-related company ETFs
Not all ETFs invest directly in crypto. Some focus on companies using blockchain technology or mining cryptocurrencies, giving investors exposure to the sector without direct market volatility.
History of crypto ETFs
Crypto ETFs have a fascinating history:
- 2013: The first Bitcoin ETF proposal was submitted but rejected by the SEC.
- 2021: The first Bitcoin futures ETF, ProShares BITO, launched in the US.
- 2024: The US SEC approved 11 spot Bitcoin ETFs and eight spot Ethereum ETFs, marking a major milestone in the regulatory landscape.
- 2025: More spot crypto ETFs, including Solana (ETF), Hedera (HBAR), Litecoin (LTC) and XRP ETFs, have been approved.
Globally, crypto ETFs are also available in Canada, Europe, and Asia, often with different regulatory rules. While the US has made progress, regulatory uncertainty remains, especially for coins beyond Bitcoin (BTC), Ethereum (ETH), Hedera (HBAR), Litecoin (LTC) or XRP.
How to trade crypto ETFs
Trading crypto ETFs is similar to trading stocks:
- Open a Brokerage Account: Some of the popular platforms where you can trade crypto ETFs are Fidelity, Charles Schwab, Robinhood, and eToro.
- Fund Your Account: Deposit fiat currency to buy ETF shares.
- Research ETFs: Compare fees, liquidity, performance, and risk profiles.
- Place Your Order: Buy or sell shares during market hours.
- Monitor and Manage: Track ETF performance and adjust holdings as needed.
By trading ETFs, you gain exposure to crypto without worrying about wallets, keys, or exchanges.
The major Crypto ETFs you can invest in
Spot Bitcoin ETFs
- ARK 21Shares Bitcoin ETF (ARKB)
- Bitwise Bitcoin ETF (BITB)
- Grayscale Bitcoin Trust (GBTC)
- Grayscale Bitcoin Mini Trust (ETH)
- Franklin Templeton Digital Holdings Trust Bitcoin ETF (EZBC)
- VanEck Bitcoin Trust (HODL)
- iShares Bitcoin Trust (IBIT)
- Fidelity Wise Origin Bitcoin Fund (FBTC)
- WisdomTree Bitcoin Fund (BTCW)
- Invesco Galaxy Bitcoin ETF (BTCO)
- Valkyrie Bitcoin Fund (BRRR)
- Franklin Hashdex Bitcoin ETF (DEFI)
Spot Ethereum ETFs
- 21Shares Core Ethereum ETF (CETH)
- Fidelity Ethereum Fund (FETH)
- Grayscale Ethereum Mini Trust (ETH),
- Franklin Ethereum Trust (EZET)
- VanEck Ethereum Trust (ETHV)
- Bitwise Ethereum ETF (ETHW)
- Blackrock iShares Ethereum Trust (ETHA)
- Invesco Galaxy Ethereum ETF (QETH)
Futures-based ETFs
- ProShares Bitcoin Strategy ETF (BITO)
- ProShares Ether Strategy ETF (EETH)
These ETFs represent a mix of spot and futures-based offerings, with many providers actively seeking new approvals. It is important to note that this is just a part of the available crypto ETFs; there are many more out there, especially as more crypto ETFs get approved.
Benefits of investing in crypto ETFs
Investing in crypto ETFs comes with several advantages:
- Accessibility: You can buy and sell ETF shares through regular brokerage accounts without a crypto wallet.
- Liquidity: ETF shares are easier to trade than underlying cryptocurrencies on many exchanges.
- Professional Management: Fund managers handle the buying, selling, and custody of assets.
- Portfolio Diversification: By investing in crypto ETFs, you spread risk across multiple cryptocurrencies or blockchain companies without owning them.
- Security: Crypto ETFs reduce the risk of hacking or losing access to crypto wallets.
Risks and limitations of investing in Crypto ETFs
Despite their benefits, crypto ETFs are not without risk:
- Price Volatility: Crypto markets are notoriously volatile, which can affect ETF values.
- Tracking Errors: Futures-based ETFs may not perfectly mirror the underlying crypto’s price.
- High Fees: Crypto ETFs often charge higher expense ratios than traditional ETFs.
- Lack of Direct Ownership: Investors don’t control the underlying assets or private keys.
- Limited Trading Hours: ETFs trade only during stock market hours, unlike 24/7 crypto markets.
- Regulatory Risk: Shifts in laws or regulations can impact ETFs significantly.
Comparing crypto ETFs and direct crypto investments
| Feature | Direct Crypto Investment | Crypto ETFs |
| Ownership | Full control of digital assets | Shares in a fund, no direct crypto ownership |
| Custody | Requires private key management | Managed by the ETF provider |
| Trading Hours | 24/7 | Market hours only |
| Fees | Network/transaction fees | Management fees/expense ratios |
| Extra Opportunities | Staking, lending, governance | None |
Crypto ETFs offer convenience and reduced operational risk, but they lack direct control and some potential crypto-specific benefits.
Considerations you should make when investing in crypto ETFs
- Risk Management: Choose ETFs aligned with your risk tolerance.
- Investment Goals: Spot ETFs provide direct exposure; futures ETFs can hedge or speculate.
- Market Timing: Remember, ETFs trade only during stock market hours, so sudden crypto market swings may not be reflected immediately.
- Diversification: Combine crypto ETFs with traditional assets to balance your portfolio.
Alternatives to crypto ETFs
If crypto ETFs aren’t a perfect fit for you, you can explore:
- Crypto Trusts: These are investment vehicles that hold crypto directly, often limited to accredited investors.
- Crypto ETPs: These are exchange-traded products backed by crypto assets through special-purpose vehicles.
- Stocks of Companies Holding Crypto: These are shares/stocks of public firms like MicroStrategy or Tesla that offer indirect exposure.
- Blockchain or Crypto-Related ETFs: These are ETFs that focus on companies driving blockchain innovation.
Common misconceptions about crypto ETFs
- ETF Shares ≠ Direct Ownership: Owning shares does not give you access to the underlying cryptocurrency.
- Not Risk-Free: ETFs reduce operational risks but remain exposed to market volatility and regulatory changes.
- No 24/7 Trading: Unlike crypto markets, ETF trading is limited to traditional market hours.
Understanding these distinctions ensures you set realistic expectations for your investment.
Conclusion
Crypto ETFs offer a simpler, more regulated way to participate in the cryptocurrency market. They provide access, liquidity, and professional management while reducing some of the challenges of direct crypto ownership.
However, they carry market, regulatory, and tracking risks, and investors must weigh these against potential rewards. By understanding how crypto ETFs work, choosing the right products, and aligning them with your investment goals, you can make informed decisions and potentially benefit from the growth of the digital asset space.
Frequently asked questions (FAQs)
What is a crypto ETF?
A crypto ETF is a fund traded on stock exchanges that tracks the price of cryptocurrencies or related assets, giving investors exposure without owning the digital coins directly.
How do crypto ETFs differ from buying cryptocurrencies directly?
Crypto ETFs provide indirect exposure through a regulated fund, while direct ownership requires managing wallets, private keys, and the underlying coins.
Do I own the cryptocurrency if I buy a crypto ETF?
No, owning a crypto ETF means you own shares in the fund, not the underlying cryptocurrency itself.
What fees are involved in investing in a crypto ETF?
Crypto ETFs typically charge management fees and expense ratios, which may be higher than those for traditional ETFs.