» How To Invest in Crypto ETFs?

How To Invest in Crypto ETFs?

By Shrey Jain
— May 14, 2022
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From early investors making significant profits to new investors going big with their portfolios, the crypto industry continues to be a relatively new venture for many. But, thanks to the volatility that it brings along, the industry carries a potential for significant profits and losses equally.

However, all the differences in the volatility aspect cannot take away the fact that cryptocurrency has been a field of innovation. With elements of finance and decentralization walking into the picture, the crypto space continues to be innovative with various digital-asset-based funds.

Yes, following years of ups and downs, Cryptocurrencies have finally made their way into mainstream stock exchanges in the form of ETFs.

Sounds appealing, right? But how do you get started with these ETFs? Continue reading as we explore these crypto ETFs and how you could get started with investing in them.

 

What Is a Crypto ETF?

ETFs, better known as exchange-traded funds, are based on financial products that list their shares as traditional equities over the stock exchange. In a manner, ETFs can be considered equivalents to mutual funds. These investment assets follow the price of an individual or basket of assets, allowing investors to diversify their portfolios via an entire asset class.

Similarly, a crypto ETF is like a fund that gives investors their way to a diversified portfolio of crypto coins or tokens. As a fund-based product, an ETF comprises several asset classes where the money is invested in a portfolio of securities around a common theme.

In the case of crypto ETF, the valuation is based on the cryptocurrency markets, which means one of two factors:

 

1. The fund could only invest in cryptocurrency. As a result, it will be made up entirely of cryptos such as BTC and ETH tokens, with the fund’s worth reflecting the value of its cryptocurrencies.

2. As an asset type, the fund might invest in cryptos. This implies that the fund may invest directly in cryptos, and businesses related to the cryptocurrency sector. It may, for example, hold equity in cryptocurrency marketplaces or firms that provide wallets and other trading tools.

 

Alternatively, the fund might also invest in the crypto future and options market. The ultimate goal with investment in ETFs is to reflect the value of cryptos as an asset class while avoiding the risks involved with buying specific products.

Here are some of the top crypto ETFs to consider:

  • ProShares Bitcoin Strategy ETF (BITO)
  • Grayscale Ethereum Trust (ETH)
  • Bitwise 10 Crypto Index Fund (BITW)
  • Global X Blockchain & Bitcoin Strategy ETF (BITS)
  • Valkyrie Balance Sheet Opportunities ETF (VBB)

Now that you have a better understanding of what crypto ETFs are let’s look at how you could start investing in them in the following section.

How to Invest in Crypto ETF

Step-By-Step Guide on How to Invest in Crypto ETF

Once you decide to invest in a crypto ETF, you’ll have to follow the listed steps to get started:

 

    1. Decide Your ETF Investment Strategy

    While crypto ETFs are not much diversified currently, you still have a few different options. Before investing in any funds, it is wise first to understand the type of ETF you’re investing in, followed by the investment strategy you’ll be following.

    However, if you’re still confused, consider asking yourself the following questions:

    1. How long am I looking to invest in it?
    2. Will I be investing in a diversified portfolio?
    3. Would I be investing in a collection of assets rather than bonds, individual stocks, or financial assets?

     

    1. Open a Brokerage Account

    To buy shares of any ETF, you’ll need access to a brokerage account. Since there are several options available in the market, you might want to go through the several options before registering yourself with one that suits your investment strategy & portfolio. Some of the popular platforms include Ally Invest and E-Trade.

    1. Decide How Much You Want to Invest

    Once you’re done opening a desirable account, the next step is to determine how much you want to invest in the crypto ETF. To decide, look at the rest of your portfolio and select the crypto ETF that suits your investment goals.

     

    1. Calculate How Many Shares You Can Buy

    This is by far one of the most crucial steps in investing in crypto ETF. Here, you need to look for your desired ETFs ticker symbol. Once you determine its price, you need to calculate the number of units or fractional units you can buy with the amount you are willing to invest. For instance, if you decide to invest in BLOK and you have $120 to invest, you can purchase 2.3 shares of the ETF.

     

    1. Set Up an Automatic Investing Plan

    Once you’re done placing your first order and have begun your crypto ETF journey, you have the option to set up automatic fixed contributions to make monthly ETF purchases.

     

    Why Invest in Crypto ETF?

    1. A simple investment tool

    Crypto ETFs are a simple investment tool! You could get started with a very small investment if you choose to through a traditional brokerage account which may be used to buy, hold, and sell them. Adding to it, ETFs remove the element of security and safety issues. Here, Investors do not have to go through the hassles of trading on unregulated crypto exchanges as they would with direct investment in cryptos which might also be exposed to hacks.  

    1. Invest in businesses you trust

    Crypto ETFs are issued by licensed firms and traded on mainstream, regulated exchanges so that you may invest with confidence. Once you know that all the involved parties are regulated and all the trades are supervised to prevent market manipulation, you can proceed with investments without any hassle.

    1. No wallet to lose

    Investors losing their keys, in turn losing their investments, has been a horror for many! However, this is where ETFs stand out, as you don’t have to worry about losing your key and access to your coins. Instead, the Authorized Participants oversee buying, storing, and selling the coins that back the ETF. This way, your ETF is held in your brokerage accounts just like any regular share or other equities.

     

    Now You Know!

    Investing in crypto ETFs is a better, safer way to invest in cryptocurrency! Now that you have an idea of how to get started with them, we hope you make the most of this investment tool. Lastly, when investing in such tools, it should be noted that the crypto ETFs follow the crypto market, and since the market is touted to be volatile, you might want to take calculated risks in the process. All the best!

     

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