Can you trade cryptocurrency ETFs in the U.S.?

[Jane Goodwin]

[Sheila Olson]

As of early 2019, the Securities Exchange Commission hasn’t approved any crypto ETFs for the U.S. market. There is one Bitcoin-based trust, the Grayscale Bitcoin Investment Trust (symbol GBTC) that is quoted on the OTCQX and is eligible to be held in certain IRA accounts and individual brokerage accounts. Cryptocurrency ETFs have been hotly debated at the highest levels, especially since the CFTC approved crypto futures, which were picked up by both the CME and the CBOE. It seems logical that a crypto ETF backed by crypto futures would be a shoo-in for regulatory approval in the U.S., but so far, that hasn’t been the case. However, things may be changing. One SEC commissioner issued a stern letter of dissent after the SEC declined to approve the much anticipated Winklevoss twins’ Bitcoin ETF. Commissioner Hester Peirce came out in favor of cryptocurrency, believing it is ripe enough for the U.S.’s well-regulated markets. With “Crypto Mum” Peirce on their side, many crypto proponents believe approval is near for crypto-backed assets. Many investors interested in cryptocurrency view the ETF as the ultimate asset class for getting into the crypto market. The theory is that crypto will respond the same way gold prices did when gold ETFs were introduced to the market in 2010. Gold experienced a huge rally at the time, and many traders and speculators would love to see a similar crypto boom. That doesn’t mean retail investors are locked completely out of the crypto market. There are a number of SEC-approved blockchain ETFs currently trading on U.S. exchanges—the Reality Shares Nasdaq NexGen Economy ETF and the Amplify Transformational Data Sharing ETF come to mind. You can also find crypto ETNs on the European exchanges. A Bitcoin ETN trades on the Nasdaq Stockholm exchange, as does a recently added Ethereum ETN. There’s an additional currency risk, however, since the notes are traded in Swedish krona. The management fees are a sobering 2.5%, which is another thing to keep in mind. Of course, there are a lot of non-SEC approved crypto products through providers like CoinJar, Coinbase, Grayscale Investments, and XBT Providers. Keep in mind, however, that the admission price for these crypto-backed index funds is steep—$50,000 is common, with some requiring an initial investment of $250,000 or more.