5 Best Crypto ETF Alternatives for Singapore Investors (2021), Money News

However, there are ETFs (exchange-traded fundss) for almost anything you can think of – tech companies, shopping malls, gold, Cowswhatever – there is still nothing that is technically a crypto ETF.

That’s because regulators are still trying to decide what to do with crypto. Several companies have applied to the US Securities and Exchange Commission for approval of their crypto ETFs. only to be rejected.

Why Should Someone Buy Crypto ETFs?

First, let’s talk about why crypto ETFs could even be a thing. After all, it’s easy enough open a crypto-exchange account and start buying Bitcoin with some spare change. So why bother looking for a crypto ETF?

There are two main reasons the ETF model might appeal to crypto investors:

  • Diversification: Some people believe in Bitcoin as our Lord and Savior, but strong competitors like Ethereum and Cardano who also have their own followers. A diversified ETF that tracks a basket of multiple cryptocurrencies helps reduce the risk of going all-in with a particular coin.
  • Reduce Platform Risks: Crypto exchanges are largely unregulated, leaving you vulnerable to evils like hacking, phishing, platform crashes, etc. Investment brokers, on the other hand, are well regulated and subject to MAS. So a crypto ETF on a regulated exchange would avoid the platform risks inherent in crypto exchanges.

But there are also major disadvantages:

  • Indirect ownership: If you are planning a trip to the USA, would you rather buy a real USD or an index-tracking USD fund? Probably the latter, right? The big downside to owning an ETF instead of the underlying cryptocurrency is that you can’t use it to transact or use the blockchain network. Some people would prefer to hold “real” cryptocurrency.
  • High entry barrier: You can buy crypto on an exchange quite cheaply and with little money. As we will see later, crypto ETF-like products tend to incur higher fees and therefore have a higher barrier to entry.

5 best alternatives to crypto ETFs in Singapore

While waiting for crypto ETFs to become a reality, investors may want to try the following alternatives:

  1. DIY crypto portfolio
  2. 21 stocks Crypto Basket Index ETP (HODL)
  3. Amplify Transformational Data Sharing ETF (BLOK)
  4. ARK Next Generation Internet ETF (ARKW)
  5. GrayScale Bitcoin Trust (GBTC)

Note that none of them are perfect replacements for a diversified crypto ETF just yet, so each has its strengths and drawbacks. We’ll go over the 5 crypto ETF alternatives in more detail below.

1. DIY portfolio on a crypto exchange

Not sure if you are a Bitcoin maximalist or an Ethereum maximalist? If you really don’t want to put a team together and would rather follow the crypto market in general, you might want to build your own diversified portfolio by holding the top X (let’s say 5) cryptos by market cap.

Here are the current top 5 according to CoinMarketCap:

Cryptocurrency code Market capitalization
Bitcoin BTC $ 728 billion
ether ETH $ 313 billion
Tether USDT $ 61 billion
Binance coin BNB $ 55 billion
Cardano THERE IS $ 44 billion

As an example, you can do this by spending $ 1,200 in a. put Crypto exchange and buy:

  • $ 728 from BTC
  • $ 313 ETH
  • $ 61 USDT
  • $ 55 from BNB
  • $ 44 ADA

Then readjust your portfolio regularly (or just leave it alone).

With this method, you own the crypto directly and can invest with very little money. But you will be exposed to the security risks associated with crypto exchanges.

2. 21 stocks Crypto Basket Index ETP (HODL)

That’s not a typo – HODL is an ETP, not an ETF.

ETP or exchange-traded product is just a generic term for any type of investment product that tracks the underlying assets and can be traded on exchanges. ETFs are a subset of ETPs.

Well, as we stated at the beginning, there are no crypto ETFs. There is, however, crypto ETP.s, which are actually ETNs (Exchange Traded Notes).

ETNs are complex financial instruments used by companies like 21shares and XBT provider. Unlike an ETF, which consists of a stake in the underlying assets, an ETN includes promissory notes – a type of collection of promissory notes.

Once you are familiar with the concept, the most accessible diversified ETN in Singapore is 21 stocks Crypto Basket Index ETP that is also possible from HODL. How sweet.

HODL is available on Saxo Markets, but the commission is high at 0.1 percent (at least 18 Swiss francs or S $ 26.82). In addition, this ETP has an integrated management fee of 2.5 percent compared to the index-tracking ETFs we know and love.

On the other hand, you benefit from the relative safety of a MAS-regulated broker – although that is no guarantee of the performance of your investment.

ALSO READ: The 5 best cryptocurrency exchanges in Singapore in 2021

3. Strengthen Transformational Data Sharing ETF (BLOK)

Bullish on crypto, but want to stick with traditional, regulated investments like stocks? There are some publicly traded companies whose businesses are based on cryptocurrency (like Coinbase) or who own cryptocurrencies (like MicroStrategy, Tesla and Square).

Investing in these companies in the stock market would then expose you to crypto, albeit in an indirect way. You can do this easily and cheaply with any good online brokerage.

But if you don’t find yourself searching for companies or rebalancing yourself every time Elon Musk tweets, you might be looking for an ETF with oversized exposure to these companies.

A good example is Amplify’s US-listed blockchain ETF, also known as BLOK. The top positions include MicroStrategy, Square, PayPal, Coinbase and Nvidia.

Compared to HODL, its expense ratio of 0.71 percent is as cheap as chips. But it’s a completely different concept so don’t compare them side by side.

4th Next Generation ARK Internet ETF (ARKW)

Another popular actively managed ETF for crypto lovers is Next Generation ARK Internet ETF (ARKW). ARKW is managed by Cathie Woods ARK Invest and is a US listed ETF that emulates the “next generation internet”.

Some of the big companies in the crypto space are in the top 10 holdings. These include Tesla, Square, Coinbase and Grayscale Bitcoin Trust (more on this in the next section).

Compared to BLOK above, ARKW isn’t that cryptocentric. The new technologies featured in ARKW include blockchain and peer-to-peer payments among others – there are other things like cloud computing, AI, big data and cybersecurity too. This means that ARKW is more diversified than BLOK.

Its 0.79 percent expense ratio is affordable, and it’s also easy to buy from any online broker that allows you to trade in US markets.

5. Coming soon? Grayscale Bitcoin Trust (GBTC)

A number of fund houses invest in cryptocurrency, but these funds are usually only available to institutional / accredited investors. That means you and I can’t buy them on exchanges.

However, one of the largest Bitcoin funds, the Grayscale Bitcoin Trust (GBTC), is in the process of being converted into an ETF.

If this conversion is successful, the Grayscale Bitcoin ETF becomes a true crypto ETF. Structurally, it will be different from the ETNs mentioned above.

Instead of being based on promissory notes, it is said to be backed by “real” Bitcoin. We don’t know the exact mechanics yet, but apparently it should be modeled on it Gold ETFswhich are also deposited with real gold.

Assuming this ETF is listed on a common exchange like the NYSE, it should be accessible to almost anyone with a brokered account.

ALSO READ: A Guide for Interested Investors to Cryptocurrency (2021)

… or you just might not bother

The 6th alternative is not to bother looking for a crypto ETF replacement as it may be too early to add crypto to your portfolio.

For now, Cryptocurrency is extremely volatile and therefore risky. This is mainly because of how new it is to the world – we are still thinking about how we should assess its value and how we should regulate it.

As the crypto market matures and we decide together how to treat it, there will most likely be more and better options for low-cost passive investors.

If you still want to try crypto for fun, make sure that you:

  • Understand the asset accurately
  • Have a solid investment strategy
  • Invest an amount that you can afford to lose
  • Do what you can to minimize the risks

Much luck!

This article was first published in MoneySmart.

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