Cryptocurrency has been going through some inner-battles as of late. Joining the “ETF Report” with hosts Alexis Christoforous and Kristin Myerson Yahoo Finance, ETF Trends’ CIO and Director of Research, Dave Nadig, discusses what kind of options there are for those investors who want to get into the crypto space.
As Nadig explains, volatility in this area should not be much of a surprise. Crypto, in general, generally has a level of context that needs to be applied, so in this current instance, news out of China or the occasional comment from notable figures could move individual currencies.
However, the approach to looking at some of the equities associated with the space may make it a little more comfortable for investors. Nadig mentions the Bitwise Crypto Industry Innovators ETF (BITQ) and the VanEck Vectors Digital Transformation ETF (DAPP), which are products that invest in the companies underneath this crypto revolution.
This doesn’t deny that organizations such as Coinbase will have a bad day when Bitcoin is down 30% intraday. However, long-term investors should expect these companies to maneuver well in the crypto space, with the addition of an ETF package like BITQ to help deliver something more secure.
“Crypto, in general, is extremely narrative dependent, so when we get a hiccup, … it really is going to move individual currencies,” @ETFtrends’ @DaveNadig says. “Looking at some of the equities associated with the space may make it a little bit more comfortable for investors.” pic.twitter.com/z4vViwqk4f
— Yahoo Finance (@YahooFinance) May 19, 2021
As far as ways to get exposure to the space, Nadig explains how BITQ and DAPP are funds that focused on decentralized finance, which is a part of the industry that’s interesting and has the least to do with the value of Bitcoin on a day-to-day basis. The Amplify Transformational Data Sharing ETF (BLOK) is another ETF tracking the space.
“If you look across those funds, you are going to see a lot of the same holdings. It is still a pretty nascent industry,” Nadig notes.
Looking at what’s taking place in the next half of the year, it is time to consider whether investors should be climbing into some of those tech names and tech-heavy ETFs as a way to mitigate risk. For Nadig, based on what advisors have been saying, the move seems to be de-risking equity portfolios. They were at the front-end of unloading some of these tech names. To counter, there was a push of allocation into slightly safer or more income-oriented names. RSP, for example, has the ability to de-leverage from the names at the top of the cap sheet and investing in some of the rest of the economy that isn’t in those FAANG names.
Nadig continues, “There’s also been a lot of focus on dividend payers, as advisors really struggle to create income streams for their customers. So, we’ve seen some interest in fixed income in unusual places. We’ve seen a lot of interest in things like the ProShares S&P 500 Dividend Aristocrats (NOBL) really helping bring that feature to an equity allocation while you’re simultaneously derisking. Whether or not today’s the day to jump into a tech fund, I think that’s generally a mug’s game trying to call bottoms. However, if you’ve been on the sidelines, averaging in is never a bad strategy.”
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