Mutual funds are a core investment for most investors in traditional finance. It stands to reason that this would translate over to the crypto market as well.
Unfortunately, that isn’t the case. Currently, there is only one crypto mutual fund in the U.S. Which means that, if you want something similar to that investment vehicle, you’ll have to find some alternatives.
To provide other options, we have composed a list of the top five best blockchain mutual fund alternatives you could invest in today.
And if you’re looking for more direct bitcoin exposure you now have the option to invest in spot bitcoin ETFs. We look at this new group of assets in detail in our post on Bitcoin ETFs: What They Are and How to Invest. It’s well worth checking out.
Our Pick for Blockchain Mutual Funds
The upside of mutual funds is that they are a responsible way to generate wealth. The downside is that there is only one U.S. cryptocurrency mutual fund: the Bitcoin Strategy ProFund (BTCFX), launched in the summer of 2021. It quickly made history as the first-ever bitcoin strategy mutual fund.
Why we like BTCFX:
Besides BTCFX being the only crypto mutual fund in the U.S., it is also one of the only ways to gain exposure to BTC and crypto through the TradFi markets. Though the fund invests primarily in bitcoin futures contracts, it maintains a diverse portfolio by investing in Canadian Exchange Traded Funds, Money Market Instruments, and Reverse Repurchase Agreements.
Blockchain Mutual Funds vs. Blockchain ETFs
Why are there so few blockchain mutual funds? These funds have investment constraints that allow them to only invest in specific assets for their portfolio. As a result, high-risk investments such as shares in blockchain startups or digital assets are generally not permissible for traditional mutual funds.
A mutual fund should not be confused with an ETF. Though both terms represent baskets of individual securities, an ETF is more often comprised of passive investments used to peg the performance of a particular index. Mutual funds, however, are usually actively managed by fund managers with a mixed bag of asset classes.
That said, several ETFs serve as an alternative to blockchain mutual funds.
What Are Some of Our Favorite Blockchain ETFs?
The largest blockchain ETF (by assets under management) is undoubtedly the Amplify Transformational Data Sharing ETF (BLOK), which has $441 million AUM as of this writing.
Why we like BLOK:
It invests in “transformational data sharing technologies,” focusing on blockchain technology. Launched in 2018, this was also the first blockchain ETF approved by the SEC. Rather than investing directly in blockchain technology or cryptocurrency, the mutual fund invests in companies that partner with or directly invest in companies developing and utilizing blockchain technologies.
Siren Nasdaq NexGen Economy ETF (BLCN) is another large blockchain ETF, with $61 million AUM, that invests in companies researching, developing, or deploying blockchain technology.
Why we like BLCN:
Unlike BTCFX, BLCN invests in companies that commit material resources to developing, researching, and utilizing blockchain technology. Its investment thesis makes this ETF perfect for investors wanting to invest in cryptocurrency without holding any crypto. Instead, the fund invests in cutting-edge companies such as Coinbase, Microsoft, and PayPal, all of which have a growing stake in blockchain.
BITO and BKCH
Why we like BITO:
For investors looking for exposure to bitcoin prices without directly owning the cryptocurrency, the ProShares Bitcoin Strategy ETF (BITO) could be the ideal investment. Rather than investing on the broader development of blockchain, BITO focuses on bitcoin’s price movements.
It provides a more direct link to bitcoin’s performance and should appeal to those interested in crypto’s market dynamics.
BITO made history in October 2021, when it became the first cryptocurrency ETF the SEC allowed to trade on a major U.S. exchange. This constitutes a historic milestone in the history of cryptocurrency and has solidified BITO’s place in the market as a reliable ETF.
Why we like BKCH:
The BKCH portfolio was created with the more traditional investor in mind. Like BLCN, BKCH invests in companies directly developing and utilizing blockchain technologies.
However, a glance at their top holdings reveals that the portfolio is heavily concentrated towards companies directly involved in blockchain, with 30% invested in Coinbase and Marathon Digital. BLCN has only allocated 6% of its portfolio to these two companies.
BKCH is an excellent option for investors who prefer highly concentrated exposure to blockchain companies.
Blockchain ETFs are the closest alternative to blockchain mutual funds as they can easily be bought and sold on regulated stock exchanges, provide investors with a low-cost blockchain exposure, and can be purchased by any investor.
Exchange-Traded Blockchain Investment Products
Alternatively, you could invest in exchange-traded blockchain investment products such as digital currency Exchange-Traded Notes (ETNs) and tracker certificates.
An ETN is an unsecured debt security issued by a bank. It has a maturity date and issuer backing. These characteristics make it more similar to bonds than ETFs, representing equity in a basket of assets. The investor profits from an ETN through price appreciation once they are paid on maturity.
Of course, ETNs come with downsides, too. If you’re a U.S. resident, no ETFs trade in the U.S. However, there are several European ETFs if you can access them.
VanEck has historically led this space with their single and multi-crypto ETNs. They offer fully collateralized ETNs available to traders through regular banks and brokers, covering all the major coins, including bitcoin, Ethereum, and Solana.
VanEck has made sure that this growing technology is made accessible to traditional investors. They highlight safety and cost efficiency as primary advantages.
In the past year, their ETN, called the “Leaders” ETN, has boasted returns of over 110% for investors.
[For more, see our Best Crypto ETFs, ETNS, and ETPS guide.]
Tokenized Blockchain Funds
Blockchain technology has enabled the emergence of a new type of investment vehicle called the tokenized investment fund. Tokenized investment funds allow investors to gain exposure to venture capital or digital asset investments by purchasing a single digital token.
Alternatively, investors who want broad exposure to the leading digital currencies and physical assets could invest in the recently launched Wisdomtree Prime.
Wisdomtree Prime is a digital application for savvy investors. It lets you invest in digital coins, gold, bonds, and equities from one platform. Its innovative approach utilizes blockchain technology to create a decentralized and distributed ledger system. This holds the record of ownership for investors securely and transparently.
[For more, see our intro to Investor DAOs.]
There are also many crypto hedge funds and venture capital firms that you can invest in to gain blockchain exposure.
However, the minimum investment requirement for these funds is usually relatively high. Many funds can be challenging to get into if you are not a high-net-worth individual with connections in the industry. There are enough crypto funds out there that will allow you to invest, even with smaller capital contributions.
One of the largest crypto Hedge Funds is PolyChain Capital. Founded in 2016, this hedge fund invests in early-stage start-ups focused on blockchain technology and cryptocurrencies. However, the current minimum investment is $1,000,000.
A more affordable alternative is Pantera Capital, which requires a minimum investment of $100,000. Founded in 2003, Pantera Capital was initially a traditional hedge fund focused on investing in macro trends. The company leaped to focus on blockchain and cryptocurrency and now has several high-profile institutional backers.
The main benefits of investing in crypto funds are that your money is managed by professionals and that token storage is taken care of by the investment firm.
For investors who prefer a hands-off approach, crypto funds (similar to blockchain ETFs) provide an excellent alternative to blockchain mutual funds.
[For more, see our list of bitcoin hedge funds.]
Digital Real Estate Investing
In April 2021, California billionaire Rick Caruso’s real estate firm began accepting rent payments in bitcoin. Blockchain and digital assets are becoming an integral part of the real estate industry, and investors can now put their money into tokenized real estate platforms.
Lofty.ai allows you to invest in tokenized real estate for as little as $50. The company’s flagship AI and in-house investment team vet each potential investment. RealBlocks is another noteworthy investment opportunity in the real estate space. The company’s platform allows investors to buy fractional interests rather than entire assets or portfolios.
Meridio allows commercial property owners to sell digital shares of their real estate. The platform connects property owners looking to liquidate portions of their ownership with individual and corporate investors.
Blockchain has much to offer the real estate industry, as its technology can help increase trust through transparency. Trust is imperative in real estate, as real estate agents, listings, and websites all require significant trust from buyers and sellers.
Additionally, blockchain technology can speed up the contract process, reduce costs, and save time.
Invest in Digital Assets Directly
Finally, you can build your digital asset portfolio. By investing in the digital tokens of the most promising blockchain projects in the market, you can gain broad exposure to the growth in the blockchain technology sector.
Constructing your portfolio will involve thoroughly researching the digital assets you want to invest in to ensure you choose the digital currencies and tokens that suit your risk-return profile.
Most investors begin their journey into digital assets by investing in blue-chip cryptocurrencies, which are highly established, trusted digital assets with large market capitalization. Some of the top blue-chip cryptocurrencies include bitcoin and Ether, the two oldest and most-established cryptocurrencies today.
Other notable blue-chip cryptocurrencies include Cardano, Binance Coin, Tether, and Uniswap. Of course, top crypto options can change, so gaining access to exclusive crypto content, such as the Blockchain Believers Portfolio, can help you decide which ones are worth your investment.
If you’re looking to get into crypto mutual funds, your options are remarkably limited. But, fear not. The alternatives mentioned above should provide sufficient blockchain exposure for your investment portfolio, whether or not you invest in blockchain mutual funds.
- Bitcoin ETFs: What They Are and How to Invest (in 2024)
- Bitcoin ETF Approval: Timeline and Estimated Approval Dates
- Security Tokens: What They Are and How to Invest (in 2022)
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