The record-breaking CRYP ETF by beta shares has pioneered the way for ASX-listed ETF as the First Crypto ETF, But how does this share-backed option work, and Should I Buy CRYP ETF?
Should I Buy CRYP ETF: Pros and Cons
- Achieve indirect Cryptocurrency Exposure through an easy trade
- Excellent liquidity and fees compared to some direct Crypto investing techniques
- No-Direct Cryptocurrency Holdings
- Only 32 holdings (limited diversification)
- Relatively High Management Fees
Who Should Buy CRYP ETF?
The CRYP ETF is a very niche thematic ETF that will be adopted by many investors looking to gain indirect exposure to the cryptocurrency space. With Cryptocurrency offering extreme volatility as a ‘speculative’ investment, we can see why many investors are avoiding the cryptocurrency space.
However, with an estimated cryptocurrency market cap of $1.9 Trillion, there’s no question that widespread adoption has begun on this new asset class. By investing in companies focussed on cryptocurrency, investors can seek to profit from the crypto movement without necessarily being prone to the same violent volatility.
Should I Buy CRYP ETF Facts
|Benchmark||BITWISE CRYPTO INNOVATORS INDEX|
|Number of Holdings||32|
|Assets Under Management||$125M|
|Inception Date||2nd Nov 2021|
|Distribution Reinvestment Plan||Yes|
|Total 1-Year Returns||470.20% p.a (Index Return)|
CRYP ETF Price
CRYP has had a pretty disappointing launch since the on second of November. The fund initially floated at a price of $11.25. The price spiked at $12.42 before quickly returning to its float price. The past performance of the index seems promising with decent returns. The past year has seen the index jump over 470%. However, the ETF has been created out of the excitement surrounding cryptocurrency companies, because of this we expect returns to be great. We will have to wait for actual historic returns.
About CRYP ETF ASX
CRYP has become the first ASX-listed ETF focussed on providing investors with exposure to the exploding cryptocurrency space. The ETF was recently launched in early Nov 2021. The fund is managed by the reputable Betashare group which describes CRYP as ” a convenient, cost-effective way to gain exposure to the leaders of the rapidly emerging crypto economy.”
However, rather than directly investing in our favorite cryptos like bitcoin, ether, ripple, and Shiba the fund provides investors with an in-direct approach through investing in a number of listed companies centering around the cryptocurrency theme. So by doing this, the fund can help investors capitalize on the growth of the cryptocurrency sector, but with reduced volatility of holding the asset.
The fund has seen a massive uptake in popularity as we saw it set an ASX ETF record in trading volumes on launch. The ETF saw $24.5 million worth of trading volume by midday, just 1½ hours after its first trade. By 1 pm, this had traded $28 million in value.
CRYP Share Registry: Link Market Services. Through Link Market Services, you can manage your holdings and communications, and also select whether or not to reinvest distributions.
CRYP is domiciled in Australia meaning it is a registered fund in Australia for tax purposes. Investors who buy into this ETF, and are Australian residents for tax purposes, will be subject to Australian taxes and regulation.
CRYP ASX Portfolio Goal
“CRYP aims to track the performance of an index (before fees and expenses) that provides exposure to global companies at the forefront of the dynamic crypto economy”Betashares
CRYP is designed to broadly capture the cryptocurrency sector by investing in pure-play crypto companies including:
- Cryptocurrency Exchanges
- Crypto mining companies
- Mining Equipment Forms
- Companies with a balance sheet of at least 75% crypto assets
CRYP ETF Benchmark Index
The CRYP ETF is indexed to the Bitwise Crypto Innovators Index. The bitwise group itself operates an ETF tracking the same index, known as BITQ which is listed on the NYSE at a fee of 0.85%.
This index is market cap-weighted and provides exposure to companies it considers Tier 1 or Tier 2 Crypto Innovators. The group defines these as follows:
- Derive more than 75% of revenues directly from servicing cryptocurrency markets, including mining firms, mining equipment suppliers, or crypto financial services companies.
- Have more than 75% of their net assets in bitcoin, ethereum, or another liquid cryptocurrency
- Not in bankruptcy proceedings
- Not being classified as Tier 1 and being a large-cap company (>$10bn), and either
- Having a significant dedicated business initiative explicitly focussed on crypto, that is reported in at least one of the company’s official quarterly or annual filings from the past 12 months. This may include the purchase, sale, development, holding, mining, processing of crypto assets
- Or holdings at least $100 Million of bitcoin, ether or another liquid crypto asset on their balance sheet.
CRYP ETF Holdings
The CRYP ETF holds solely listed companies focussed on the Cryptocurrency sector and does not hold any crypto directly. The ETF is largely US focussed which accounts for 77.3% of the holdings.
Of the group’s holdings, Silvergate Capital Corporation is currently the largest with a weighting of 12.3%. This group is a holding company for Silvergate Bank. The Bank provides financial services to participants in the digital currency industry. They have a market cap of over $5.8 Billion.
Coinbase is also a significant holding of the ETF accounting for over 10%, which is something we have heavily invested in, check out our analysis here.
CRYP ETF Fees
- Management Fee: 0.67% p.a
- Indirect Costs: 0%
- Transaction Costs: 0.08%
- Bid/Ask Spread: Unknown
Estimated Total MER: 0.75%See Complete ETF Guide for More Fee Information
How are CRYP ETF Management fees paid?
Management fees are automatically deducted from the fund’s Net Asset Value on a daily basis. This means is you as an investor never have to directly send money to Betashares. It is all processed by the fund as they deduct the fees from the underlying earnings/capital of the fund. Because of this you never really notice the fees, instead, it just reduces the fund’s performance over time. When the fund sends out their AMMA statement at tax time you can see the full details of this.
CRYP ASX Bid-Ask Spreads
The bid-ask spread is the difference in price between the highest price that a buyer is willing to pay for a security and the lowest price for which a seller is willing to sell it.
- The narrower the spread the better, as this reduces the trading costs associated with buying and selling ETFs
- Exchange-based spreads, as on the ASX, are set by the competitive tensions between market markers
- Larger Funds will tend to have lower bid-ask spreads.
- Bid-Ask spreads are not set but constantly change throughout the day, depending on supply and demand.
Since CRYP is a new fund, the average bid-ask spread of the fund is unclear. When purchasing units in the fund you can refer to the live iNAV of the fund to ensure spreads are reasonable.
CRYP Fee Comparison
|Average Bid/Ask Spread||Unknown||Unknown||Unknown||0||0.02%||0.02%|
CRYP Management fee of 0.67% would represent $67 per year on an investment of $10,000. When we account for the estimated transactional costs within the fund the total cost of holding the fund amounts to 0.75% per year. In comparison, the equivalent fees for IVV would be $4. CRYP being a niche thematic ETF, we would expect slightly higher fees, and we can see this is largely in line with other thematic ETFs.
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Should I Buy CRYP ETF Performance
In the below table we have set out the historic returns of the CRYP index compared to other popular ETF options. Currently, there is a clear lack of data available for CRYP, which was started in late 2021.
We can see amazing returns of 470% delivered by the ETF in the past year. However, this is to be expected and we see this across all newly established thematic ETFs. Since the sector has delivered excellent returns and investor sentiment this has caused Betashares to create the fund.
|1 year||3 years||5 years||10 years|
Should I Buy CRYP ETF Competitors
CRYP is the first and only currently available ASX listed cryptocurrency thematic ETF. International we have seen a number of Crypto-related ETFs established, some of which provide direct exposure to cryptocurrency holdings.
We notice that many of these funds have been established in 2021 after crypto assets were allowed to be listed via funds.
Types of Cryptocurrency ETFs
There are a number of Cryptocurrency Themed ETFs which all operate in numerous ways. These can be summarised under three categories:
Physical-backed crypto ETFs
Physical-backed ETFs will hold actual cryptocurrencies/tokens which back the value of the ETF. As such these ETFs are tied directly to the price of the underlying cryptocurrency(s). A rise in a coin should see a proportionate rise from the ETF.
- Pros: Direct relation to cryptocurrencies with asset-backed holdings. Providers a good alternative for people that do not wish to hold crypto directly, but still want crypto returns.
- Cons: The ETF is only available for trading during market hours, whilst crypto can be traded 24/7, as such investors can't react until market open. AUM will also quite often not reflect underlying prices during open and close due to this fact. Not currently available for retail customers.
Futures-backed crypto ETFs
ETFs will hold future contracts for the underlying cryptocurrency/token. A futures contract is an agreement that sets a fixed price and date for buying or selling an asset. As such, the fund may not directly reflect crypto returns but should be proportional to the coin's returns.
- Pros: This type of ETF has received approval for retail customers. Since the fund doesn't actually hold cryptoassets there are no risks associated with security and holding crytocurrencies.
- Cons: More expensive fees compared to holdigns Crypto directly in ETF or non-ETF form. Price may not directly reflect crypto markets.
Stocks-based crypto ETFs
Stock-based Crypto ETFs such as CRYP are widely available due to the simplicity of the fund. These ETFs act like most ordinary equity ETFs whereas the fund will hold a number of underlying companies, in this case, the funds hold crypto-related companies.
- Pros: An easy, realtivey cheap way to provide indirect-exposure to the crytocurrency space. This option likely be less volatile than actual crytocurrency options.
- Cons: These ETFs will not reflect the returns of crytocurrencies. Instead the ETF will benefit more so from the adoption of crypto. Being less volatile means these ETFs may not expeince the same up-side potential as direct crypto ETF options.
Should I Buy CRYP ETF: Prophet's Take
Whilst the CRYP ETF doesn't directly offer cryptocurrency exposure it is a step forward and a pioneer for ASX-listed ETFs. This fund does provide decent exposure to a decent range of companies that are related to the cryptocurrency space. Although this may not provide crypto-like returns, it may serve as a tool for more risk-averse investors who are looking for some exposure to the expanding crypto sector.
With an estimated cryptocurrency market cap of $1.9 Trillion, there's no question that cryptocurrency is here to stay. Still many traditional investors struggle to value or imagine the future of crypto. But, with eye-watering and life-changing historic returns it can be very tempting to jump into crypto no matter if you're for or against the sector. Stock-based ETFs such as CRYP fill this space and can act as a midground for investors who aren't quite ready to take the full crypto plunge.
Although we have added a number of cryptocurrencies and related companies such as Coinbase to the Prophet Portfolio in 2021, we have not purchased CRYP as we act for direct exposure.