The price of bitcoin is down 1% over the past seven days after being exposed to remarkably little volatility.
Investing in bitcoin, however, is rarely this smooth. Spot cryptocurrency investments are inherently volatile, and investors may be able to find the same benefits with less volatility by gaining digital assets exposure through an ETF wrapper.
2022 has started with a risk-off sentiment in the financial markets driven by weak and volatile equities. Lessened volatility is a key reason why investors are choosing to allocate to ETFs such as the Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF (BLKC), which takes a broader approach aiming to capitalize on blockchain developments, and the Invesco Alerian Galaxy Crypto Economy ETF (SATO), which offers more focused exposure to the cryptocurrency industry.
Rene Reyna, head of thematic and specialty product strategy, ETFs, and indexed strategies, Invesco, said that an optimal approach to digital assets investing is to consider the broad ecosystem, especially in a wrapper that most investors are already comfortable with owning — like an ETF.
These broad ecosystem ETFs offer exposure far beyond spot cryptocurrency, providing equities exposure to blockchain users and companies that are engaged in cryptocurrency and its relative mining, buying, or enabling technologies.
BLKC and SATO each use an equal-weighting approach, as opposed to a market cap approach, increasing diversification and lowering volatility for investors.
Reyna said equal-weighting can reduce volatility as it dilutes, to a degree, an investor’s exposure to bitcoin.
“GBTC, which is a current holding in our ETP sleeve, although it’s currently trading at a discount, is going to generally move in tandem with the Bitcoin marketplace. Same thing with your miners,” Reyna said.
BLKC and SATO each charge a 60 basis point expense ratio.
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