Crypto Equity ETFs Suffer In Risk-Off Environment

Funds tracking companies dedicated to the blockchain have posted significant losses.

One of the hottest ETF themes of a bull run in 2021 was tracking companies heavily involved in the digital assets space, but they now face a difficult 2022 as growth equities fall out of vogue. 

Eight of the 10 worst-performing nonleveraged ETFs year to date target the broader theme of the blockchain, digital economy or cryptocurrencies, according to data from ETFLogic. 
 

The funds’ returns broadly mirror the moves in bitcoin during the past several months of turbulence for anything with growth characteristics.  

The relatively small number of publicly traded firms devoted to the theme also leads to some tight correlations between funds tracking this theme. The VanEck Digital Transformation ETF (DAPP), First Trust SkyBridge Crypto Industry & Digital Economy ETF (CRPT), Global X Blockchain ETF (BKCH) and Bitwise Crypto Industry Innovators ETF (BITQ) have a 99% correlation, according to ETFLogic data, meaning their returns are nearly identical to one another. 

The downturn in crypto is not an ideal start to life for those funds and the Viridi Cleaner Energy Crypto-Mining & Semiconductor ETF (RIGZ), which all debuted last year amid a growing sense that cryptocurrencies would gain wider traction as an asset class. 

“This is just the latest in a long history of examples of incredibly poor timing on the part of asset managers when it comes to thematic fund launches,” said Ben Johnson, director of global ETF research at Morningstar. 
 

Contact Dan Mika at [email protected], and follow him on Twitter