The world’s largest cryptocurrency, bitcoin, has been enjoying increasing attention from institutional investors like big corporations and hedge fund managers. Going by a composite of prices compiled by Bloomberg, bitcoin has jumped around 3.6% to $49,913 in Asian trading on Feb 16, as mentioned in a BloombergQuint article.
The digital currency has already surged more than 60% so far in 2021 and is up more than 1,100% since March 2020. According to Chris Weston, head of research at Melbourne brokerage Pepperstone, “there’s this unadulterated wave of big players (buying) that has continued to push the price higher,” per a Reuters’ article.
Bitcoin climbed around 20% on Feb 8 after the world’s largest electric-car maker, Tesla (
TSLA Quick Quote TSLA - Free Report) , announced in a Securities and Exchange Commission (SEC) filing that it has purchased $1.5 billion worth of bitcoins. Going on, Tesla plans to eventually start accepting cryptocurrency as payment for its cars. The company’s bitcoin investment is expected to provide the company with liquidity in the cryptocurrency once it starts accepting it as payment, per a Reuters article.
There is no doubt that bitcoins are gaining popularity among institutional investors. Going by a Bloomberg’s article, a unit of Morgan Stanley Investment Management, Counterpoint Global is considering whether to invest in bitcoin. Moreover, officials have given a nod to the first North American Bitcoin ETF in Canada, namely, The Purpose Bitcoin ETF. Furthermore, BNY Mellon has set up a new unit that’s working on developing a custody and administration platform for traditional and digital assets, per a BloombergQuint article. Also, going by the same article, Mastercard (
MA Quick Quote MA - Free Report) aims to enable cardholders to transact in certain cryptocurrencies on its network. Joining the league, Japanese financial conglomerate SBI Holdings is discussing with foreign firms for its own cryptocurrency joint venture, per a Reuters article. Bitcoin: A Risky Bet?
Bitcoin’s high-volatility levels might make it difficult to use it as a transactional currency. In fact, realised volatility or daily price swings measured in terms of closing prices for bitcoin over the past 90 days came in at 72% in comparison to 16% for the broader S&P 500 index and 6% for the euro currency, according to a Reuters article. In this regard, managing partner and co-founder of Nexo in London (one of the biggest crypto lenders), Antoni Trenchev, has said that “it’s important to remember that Bitcoin never moves up in a straight line. Short-term volatility is very much a feature of this bull market and investors should prepare accordingly,” as stated in a BloombergQuint article.
Going on, the bitcoin poses the risk of being used for illicit transactions and are always open to tightening regulations, per the same article as mentioned above.
ETFs to Ride the Rally
The growing participation of traditional investment banks and fintech firms with an aim to add cryptocurrency to their products is opening up investment opportunities. Thus, we are highlighting three fintech ETFs that are likely to gain from the impressive bitcoin rally as bitcoin ETFs are not available to investors:
ARK Fintech Innovation ETF ( ARKF Quick Quote ARKF - Free Report)
It is an actively-managed ETF that seeks long-term growth of capital. The fund provides exposure to fintech innovations like mobile payments, digital wallets, peer-to-peer lending, blockchain technology, and risk transformation. With AUM of $3.06 billion, it charges an expense ratio of 75 basis points (bps) (read:
Weekly ETF Roundup: U.S. Equity Tops, Bond Flops). Global X FinTech ETF ( FINX Quick Quote FINX - Free Report)
The fund seeks to invest in companies on the leading edge of the emerging financial technology sector, which encompasses a range of innovation helping to transform established industries, like insurance, investing, fundraising, and third-party lending through unique mobile and digital solutions. It has AUM of $1.16 billion and charges 68 bps in fees (read:
3 Fintech Stocks & ETFs to Shine as Bitcoin Crosses $35,000). ETFMG Prime Mobile Payments ETF ( IPAY Quick Quote IPAY - Free Report)
The fund seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Prime Mobile Payments Index. The index provides a benchmark for investors interested in tracking the mobile and electronic payments industry, particularly focusing on credit card networks, payment infrastructure and software services, payment processing services, and payment solutions (such as smartcards, prepaid cards, virtual wallets). With AUM of $1.09 billion, it charges an expense ratio of 75 bps.
Investors can also consider blockchain ETFs like
Amplify Transformational Data Sharing ETF ( BLOK Quick Quote BLOK - Free Report) . Meanwhile, ETFs offering exposure to the blockchain ecosystem via semiconductor companies that make chips for bitcoin mining (or could make for some potential CBDCs) can be considered. The most-popular funds include iShares PHLX Semiconductor ETF ( SOXX Quick Quote SOXX - Free Report) and VanEck Vectors Semiconductor ETF ( SMH Quick Quote SMH - Free Report) . Want key ETF info delivered straight to your inbox?
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