Disruptive finance represents products and companies developing innovative methods for evolving the financial market. It can help investors capitalize on growing market trends. Disruptive finance companies include those challenging the market’s status quo, such as the cryptocurrency industry. However, the term extends beyond the blockchain, including players that facilitate digital transactions and banking.
Through its suite of thematic products, Fidelity Investments offers several disruptive finance exchange-traded products (ETPs). For example, the Fidelity Crypto Industry and Digital Payments ETF (FDIG) tracks the Fidelity Crypto Industry and Digital Payments Index, investing most assets in various companies engaged with blockchain, digital payments, and cryptocurrency as a whole.
Continuing Interest in the Crypto Industry
While some remain skeptical of the cryptocurrency industry, data indicates growing investor interest. A March 14, 2024 poll from Policy at Paradigm found that 19% of registered voters in the U.S. reported that they purchased cryptocurrency.
Fidelity’s crypto industry investment strategy, FDIG, has shown strong annual returns. As of March 31, 2024, FDIG’s market return over the last 12 months was 87.16%. The fund has a net expense ratio of 0.39%.
At the same time, investors seeking exposure to bitcoin performance may consider the Fidelity Wise Origin Bitcoin Fund (FBTC). It’s a spot bitcoin ETP that tracks the price movement of bitcoin. FBTC has $10.17 billion in AUM as of March 31, 2024.
Investor enthusiasm for bitcoin was strong in Q1 2024 as bitcoin hit all-time highs. It traded in price ranges between $65,000 and $70,000, representing a sharp jump in value from years prior. Bitcoin’s rally this year also highlights cryptocurrency as an important asset to monitor in the world of disruptive finance.
FBTC’s strong performance has mirrored the growing popularity of bitcoin. VettaFi data finds that, as of April 12, 2024, the ETP has seen high returns of 50.91% in its first three months of trading. Until August 1, 2024, FBTC is waiving its initial fees, providing investors with a lower fee entry into bitcoin exposure.
For investors seeking disruptive finance exposure broader than just cryptocurrency, Fidelity offers the Fidelity Disruptive Finance ETF (FDFF). FDFF aims for long-term profits by investing in new and established disruptive finance companies involved in digital payments, banking, and data processing, among others.
Holdings range from companies like Adyen to Visa and Mastercard, among others. FDFF also maintains some exposure to the cryptocurrency industry through investment in companies such as Coinbase and Block.
FDFF has witnessed strong annual performance, with a market return of 30.73% over the last 12 months as of March 31, 2024. The fund has a net expense ratio of 0.50% and holds $46.59 million in AUM as of March 31, 2024.
FDIG and FDFF give exposure to large centralized payments companies that support and move the crypto ecosystem forward. Visa is an example of one of these companies. The company recently enabled the ability for users to withdraw crypto in 145 countries with their Visa Direct platform. Visa has also taken a number of steps towards integrating more cryptocurrency options in recent years. These include programs to help creators navigate NFTs and programs for brands to create digital wallets where customers can store rewards.
Mastercard has also partnered with a leading crypto wallet to trial on-chain payments card. So Mastercard users would be able to spend their crypto holdings directly at locations that accept cards. This is another initiative that would potentially bridge the gap between centralized traditional finance and decentralized cryptocurrencies.
The Fidelity® Wise Origin® Bitcoin Fund material must be preceded or accompanied by a prospectus. Before investing, you should carefully consider the Fund’s investment objectives, risks, charges, and expenses.
This product is for investors with a high risk tolerance. It invests in a single asset, bitcoin, which is highly volatile and can become illiquid at any time.
FBTC is not an investment company registered under the Investment Company Act of 1940 (the “1940 Act”) and is not subject to regulation under the Commodity Exchange Act of 1936 (the “CEA”). As a result, shareholders of FBTC do not have the protections associated with ownership of shares in an investment company registered under the 1940 Act or the protections afforded by the CEA.
Digital assets are highly volatile, and their market movements are very difficult to predict. Various market forces may impact their value, including, but not limited to, supply and demand, investors’ faith and their willingness to purchase it using traditional currencies, investors’ expectations with respect to the rate of inflation, interest rates, currency exchange rates, an evolving legislative and regulatory environment in the U.S. and abroad, and other economic trends. Investors also face other risks, including significant and negative price swings, flash crashes, and fraud and cybersecurity risks. Digital assets may also be more susceptible to market manipulation than securities.
The performance of FBTC will not reflect the specific return an investor would realize if the investor actually purchased bitcoin. Investors in FBTC will not have any rights that bitcoin holders have and will not have the right to receive any redemption proceeds in bitcoin.
Fidelity Investments is waiving the fee to invest in FBTC. Starting August 1, 2024, Fidelity will begin charging an expense ratio of 25 basis points.
For more news, information, and strategy, visit the ETF Investing Channel.
Fidelity Investments® is an independent company, unaffiliated with VettaFi. There is no form of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments. Nor is such a relationship created or implied by the information herein. Fidelity Investments has not been involved with the preparation of the content supplied by VettaFi and does not guarantee, or assume any responsibility for its content.
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