The launch of new spot Bitcoin (BTC 4.09%) ETFs in January was a watershed event for the crypto industry. Arguably, it was Wall Street's biggest new product launch in nearly 30 years. The new ETFs opened up crypto investing for the individual investor, making Bitcoin as easy to buy and sell as a tech stock.
In the process, these new spot Bitcoin ETFs opened up a discussion about the best ways to build and diversify a long-term crypto portfolio. In some cases, investing in a basket of companies or cryptocurrencies may be more effective than trying to pick a winner in a volatile industry. With that in mind, here's a closer look at three top crypto ETFs to buy and hold for the long term.
iShares Bitcoin Trust
There are nearly a dozen new spot Bitcoin ETFs to choose from, but the clear leader right now is the iShares Bitcoin Trust (IBIT -2.40%). It now has over $17 billion in assets under management, and boasts an expense ratio of just 0.25%. The ETF is from BlackRock, the world's largest asset manager.
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Admittedly, there is not a lot of difference between the top spot Bitcoin ETFs. All of them hold only a single asset -- Bitcoin -- and all of them try to do it as cheaply and efficiently as possible. From my perspective, the two major points of differentiation are size (assets under management) and fees.
In both regards, the iShares Bitcoin Trust excels. It is the largest of the new spot Bitcoin ETFs, and its expense ratio of 0.25% is now the industry standard (although you can find slightly cheaper fees with Ark Invest, which offers an expense ratio of 0.21% for its ETF).
Bitwise 10 Crypto Index Fund
If you're investing in crypto, you'll probably want to diversify beyond just Bitcoin at some point, and one way to do that is with the Bitwise 10 Crypto Index Fund (BITW -1.94%). This exchange-traded fund tracks a diversified mix of 10 top cryptos, weighted by market cap, and rebalanced monthly. It is one of the largest crypto-oriented ETFs with approximately $1.1 billion in assets under management.
Given the emphasis this ETF places on market cap, Bitcoin accounts for a whopping 68% of the fund's holdings. Ethereum (ETH 3.94%) accounts for another 23%. Solana (SOL 6.17%) and XRP (XRP 1.51%) combined account for another 5.2%. All other cryptos have less than a 1% weighting.
Just keep in mind -- if you already have a large position in Bitcoin, whether directly or indirectly (such as via the iShares Bitcoin Trust), then you may not be getting nearly the diversification benefits that you think you might be getting. Yes, the fund holds 10 cryptos. But Bitcoin easily accounts for the lion's share of the fund's holdings.
Once the newly approved spot Ethereum ETFs start trading, you could make the case that it will be simpler and more cost-effective to just buy the Bitcoin and Ethereum ETFs. It really depends on how much exposure you want to smaller, lesser-known cryptos that can help to round out a diversified portfolio.
Amplify Transformational Data Sharing ETF
Finally, it's worth thinking about how to get exposure to companies within the blockchain and crypto sector. This includes exposure to Bitcoin mining companies, as well as cryptocurrency exchanges and blockchain payment companies.
One good pick here is the Amplify Transformational Data Sharing ETF (BLOK -0.76%), which offers access to a broad range of over 50 blockchain and crypto holdings. Right now, the fund's largest holdings include Coinbase Global, Robinhood Markets, and MicroStrategy. It also invests in Bitcoin mining companies like Marathon Digital Holdings and blockchain payment companies like Block.
While you could theoretically buy all these crypto stocks individually, letting the ETF handle this for you is likely cheaper and more efficient. The expense ratio is just 0.76%, and the fund's holdings appear to be balanced among best-in-class companies driving innovation in the crypto market. No single company accounts for a greater than 5% share of the fund's holdings.
Diversifying with ETFs
Most likely, Wall Street is not yet done offering new ETFs for crypto investors. If the new spot Ethereum ETFs perform anywhere close to how the new spot Bitcoin ETFs performed, it's highly likely that the process will continue with other single-crypto ETF offerings.
When you mix these single-crypto ETF offerings with ETFs that offer broad exposure to the blockchain sector, you can gain even greater diversification benefits. Just remember to peek under the hood before you buy. If you like the fund's holdings and are comfortable with the expense ratios being charged, these crypto ETFs could be a fantastic way to diversify your portfolio and build wealth over the long haul.
