The Invesco Alerian Galaxy Crypto Economy ETF (SATO) is a new arrival to the landscape of equity-based cryptocurrency exchange traded funds. Rookie status aside, SATO could be ready for its moment in 2022.
SATO is less than two months old and follows the Alerian Galaxy Global Cryptocurrency-Focused Blockchain Equity, Trusts and ETPs Index.
“The Index is comprised of stocks of digital asset companies, which are companies that are materially engaged in cryptocurrency, cryptocurrency mining, cryptocurrency buying, or enabling technologies and exchange-traded products,” according to Invesco.
Funds such as SATO are increasingly relevant today for multiple reasons. First, more and more investors are becoming enthusiastic about crypto, but many don’t want to embrace the volatility associated with direct ownership of bitcoin and the like. Second, an increasing number of stocks, including plenty of SATO holdings, are crypto-correlated but aren’t found for size or at all in traditional tech ETFs.
One of those names that could spur SATO higher in 2022 is Galaxy Digital Holdings, which trades in Toronto.
Galaxy is “a crypto-investment and Bitcoin mining firm controlled by the billionaire Michael Novogratz. The company runs two funds that are investing in interactive gaming and NFTs, and it’s buying a crypto custodian, BitGo,” reports Daren Fonda for Barron’s.
Galaxy Digital accounts for 2.48% of the SATO roster. Another SATO member firm that could boost the fund in 2022 is Voyager Digital, a rapidly growing crypto exchange operator. That stock represents 2.63% of the SATO lineup, according to issuer data.
Speaking of crypto exchange operators, Coinbase (NASDAQ:COIN) is the largest company in that space and SATO’s sixth-largest holding at a weight of 3.24%. That’s an important feature for investors because Coinbase checks the box as a stock that’s crypto correlated.
“Coinbase Global (COIN), meanwhile, is developing an NFT marketplace and could eventually become a ‘super app’ for trading, custody, and lending of digital assets. Coinbase now relies on crypto trading fees for the bulk of its revenue, depending heavily on tokens such as Bitcoin and Ether, but the long-term goal is to diversify its revenue base,” according to Barron’s.
Not surprisingly, the bulk of SATO’s 43 components are considered growth fare, as nearly 83% are classified as growth stocks.
As for bitcoin exposure, SATO has plenty of that, as it allocates 15.22% of its weight to the Grayscale Bitcoin Trust (GBTC).
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.