Digital assets provide an exciting investment opportunity. However, the technical aspect of investing in blockchain-powered assets are deterring many from entering this new market. To address this issue, several investment companies have launched regulated, exchange-traded financial products that provide investment exposure to digital assets.
What Are Exchange-Traded Digital Assets?
Exchange-traded digital asset investments are ETFs, ETNs/ETPs, Tracker Certificates, or Futures that replicate the performance of either digital assets or the blockchain industry as a whole.
ETFs include companies that have a significant stake in the blockchain industry, like IBM, Overstock, and Amazon. Tracker certificates and ETNs operate similarly in that they emulate the performance of bitcoin or other digital assets. Lastly, Bitcoin Futures offer investors the opportunity to speculate price movements on digital currencies with the exact same method used for equities.
Types of Exchange-Traded Digital Asset Investments
As investors continue to discover the digital asset market, new investment vehicles have pushed their way onto stock exchanges. ETNs/ETPs, futures contracts, and tracker certificates are among the most popular financial products for those investors seeking a light to moderate digital asset infusion.
The table below compares the various investment vehicles so that investors can choose the product that best aligns with their goals.
|Futures||Bitcoin futures offer investors exposure to the digital asset without the complications that occur when purchasing the coin itself. The Chicago Mercantile Exchange offers monthly BTC contracts that are to be settled in cash.||As with any type of futures contract, investors are agreeing to buy or sell something at a predetermined price at a specific time in the future. Futures allow investors to speculate and capitalize on future price movements in the present time.||-Contracts settled in cash
-No BTC wallet required
|ETN/ETP||An Exchange Traded Note or Product is a type of unsecured debt security that fluctuates in price similar to stocks. ETNs/ETPs track an underlying basket of securities and have become a popular method of emulating the price movements of Bitcoin without touching the asset itself.||The Bitcoin Tracker One ETN has been available on the Swedish Nasdaq since 2015. The exchange classifies the financial product as a non-equity linked “tracker certificate”. Bitcoin Tracker One gives investors exposure to the popular digital asset by tracking and essentially mimicking the performance of BTC.||-Regulated
-No storage or wallet required
|Tracker Certificates||Vontobel, a Swiss investment management group, now offers an “open-ended” Bitcoin tracker certificate. The certificate provides many of the same attributes of an ETN, but it has no expiration date, allowing investors to hold the tracker certificate for the long term.||Tracker certificates are less popular than most other investment vehicles, but they’ve become a major talking point in the digital asset market. They can track obscure and unique assets on an open-ended basis on a regulated exchange.||-Regulated
-No storage or wallet required
Why Invest in Exchange-Traded Digital Asset Investments?
Exchange-traded digital asset investments offer a stepping stone to blockchain investing. If you’re not a firm believer in digital assets but understand the inherent value of blockchain, blockchain ETFs provide the perfect opportunity to gain exposure to the industry without taking exorbitant risks. The typical companies included in blockchain ETFs are the same ones filling the S&P 500. Amazon, NVIDIA, and PayPal are just some of the firms included in First Trust’s Indxx Innovative Transaction and Process ETF (LEGR).
Tracker Certificates, ETNs/ETPs, and Futures offer more direct avenues to investing in digital assets in a regulated environment.
Investors can purchase BTC futures contracts on the Chicago Mercantile Exchange and capitalize on the wild price movements seen in the past few years. Tracker Certificates and ETNs are likely the most accurate representations of Bitcoin as regulated financial products. These investment vehicles closely follow the price movements of Bitcoin while removing major barriers to entry, such as safe storage.
Best Exchange-Traded Digital Asset Investment Products
|Exchange||Description||Launch Year||Exchange||Fee||Annualized Average Rate of Return||Issuer Reputation||Score|
|Tracker Certificate on Bitcoin||Leonteq's Tracker Certificate on Bitcoin was launched in 2017 to enable investors to gain exposure to bitcoin through a regulated investment vehicle targeted at retail investors. The Bitcoin Certificate is available in EUR, USD and CHF and trades on the Swiss Exchange (SIX).||2017||Swiss Exchange (SIX)||0.50%||43.90%||5||4.5|
|XBT Provider Bitcoin Tracker||XBT Provider's Bitcoin Tracker was the first bitcoin exchange-traded note when it was launched in 2015. The ETN enables investors to gain exposure to the digital currency bitcoin in EUR or SEK.||2015||Nasdaq Stockholm||2.50%||119.27%||4||4|
|Swissquote Bitcoin Active Index Tracker Certificate||Leonteq's Swissquote Bitcoin Active Index Tracker Certificate was launched in 2017 to enable investors to invest in bitcoin without having to buy and store the actual digital currency itself. The Tracker Certificate trades on the Swiss Exchange (SIX) and is available in USD.||2017||Swiss Exchange (SIX)||1.50%||18.07%||5||4|
|Innovation Shares NextGen Protocol ETF||The Innovation Shares NextGen Protocol ETF is an exchange-traded fund that tracks the Innovation Labs Blockchain Innovators Index, which uses AI to select companies that are involved in the development or deployment of blockchain technologies. The tracker fund is mainly invested in US stocks and its largest holdings include Intel, Amazon, and Taiwan Semiconductor Manufacturing.||2018||NYSE Arca||0.65%||8.17%||4||3.5|
|Reality Shares Nasdaq NexGen Economy ETF||The Reality Shares Nasdaq NexGen Economy ETF is an exchange-traded fund that invests in companies that are involved in developing, researching, or deploying blockchain technologies. The passively-managed fund's largest holdings include Red Hat, Intel, Xilinx, Alibaba, and ZTE.||2018||Nasdaq||0.68%||6.51%||4||3.5|
|CME BTC Bitcoin Futures||In December 2017, the Chicago Mercantile Exchange (CME) launched bitcoin futures to enable Wall Street to be on the price of bitcoin without having to actually hold the underlying digital currency. The CME's BTC Bitcoin Futures are currently the only publicly-traded bitcoin futures as the CBOE has decided to suspend its bitcoin futures offering until further notice.||2017||Chicago Mercantile Exchange||$1.25 to $7.50||-15.96%||5||3|
|First Trust Indxx Innovative Transaction & Process ETF||The First Trust Indxx Innovative Transaction & Process ETF is an exchange-traded fund on the Nasdaq stock exchange that invests in companies that develop or use blockchain technology. The actively-managed fund's largest portfolio holdings are Intel, Swisscom, PayPal, and Oracle.||2018||Nasdaq||0.65%||-2.71%||4||3|
|Reality Shares Nasdaq NexGen Economy China ETF||The Reality Shares Nasdaq NexGen Economy China ETF is an exchange-traded fund that tracks the Reality Shares Nasdaq Blockchain China Index - an index composed of Chinese companies involved in blockchain technology. The fund is the first ETF to focus on blockchain companies in China and Hong Kong.||2018||Nasdaq||0.78%||-5.35%||4||3|
|Amplify Transformational Data Sharing ETF||The Amplify Transformational Data Sharing ETF is an exchange-traded fund that invests in companies that are developing or deploying blockchain technologies with a focus on businesses in the US and Asia. The fund's largest holdings include Square, GMO Internet, SBI Holdings, and Overstock.||2018||NYSE Arca||0.70%||-2.00%||4||3|
|Open-Ended Participation Certificate on Bitcoin||Vontobel's Open-Ended Participation Certificate on Bitcoin enables investors to gain exposure to bitcoin through a regulated investment vehicle that is listed on the stock exchange in Stuttgart. The Bitcoin Certificate is denominated in EUR.||2017||Börse Stuttgart||1.50%||-15.53%||5||2.5|
|Tracker Certificate on Bitcoin Cash||Leonteq's Bitcoin Cash Tracker Certificate enables investors to gain exposure to the digital currency Bitcoin Cash (BCH). The certificate trades on the Swiss Exchange (SIX) in EUR, USD, and CHF.||2018||Swiss Exchange (SIX)||1.25%||-40.00%||5||2.5|
|Swissquote Multi Crypto Active Index Tracker Certificate||Leonteq's Swissquote Multi Crypto Active Index Tracker Certificate provides investors with diversified exposure to leading digital currencies, including bitcoin, ether, litecoin, and bitcoin cash. The certificate trades in the Swiss Exchange (SIX) and is denominated in USD.||2018||Swiss Exchange (SIX)||1.50%||-29.29%||5||2.5|
|XBT Provider Ether Tracker||XBT Provider's Ether Tracker is an exchange-traded note that was launched in late 2017 to enable investors to gain expsosure to the digital currency ether (ETH). The Ether Tracker ETN trades on the Nasdaq Stockholm exchange and can be bought either in EUR or SEK.||2017||Nasdaq Stockholm||2.50%||-7.89%||4||2.5|
The Bottom Line
Exchange-traded digital assets combine blockchain investing with the security of a regulated market. Investors who are not ready to take the plunge into digital asset investing directly can indirectly invest in bitcoin & co though regulated, exchange-traded investment vehicles.
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