After a tumultuous year, Bitcoin mining ETFs are back on top of the performance charts for the first month of 2023.
Bitcoin (BTC) and other altcoins started the new year on a bullish note, with most cryptocurrencies climbing to multi-month highs. Apart from the spot market, the ETF market is also dominated by BTC, where Valkyrie’s Bitcoin Miners ETF (WGMI) is the leading equity ETF market, up 40% year-to-date.
The Bitcoin Mining ETF is a market leader among traditional equity ETFs and leveraged equity ETFs and is considered rare. Bloomberg senior ETF analyst Eric Balchunas said the Valkyrie Bitcoin Mining ETF is highly “concentrated,” with investments in just 20 firms, including Argo Blockchain, BitFarm and Intel, among other notable names.
ETF, United States, Cryptocurrency
The WGMI ETF was listed on the Nasdaq in February 2022, but does not invest directly in BTC. It offers exposure to 80% of its net assets through the securities of companies that derive at least 50% of their revenue from BTC mining. Valkyrie invests the remaining 20% in companies that hold “a significant portion of their total assets” in bitcoin.
Equity Market Performance ETF. Source: Bloomberg
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The first bitcoin ETF to be approved in the United States was the ProShares Bitcoin Strategy ETF, which launched in October 2021 and tracked bitcoin prices through futures contracts traded on the CME market. The first ETF gained traction in the market very early, trading $1 billion on its first day. This has led many to believe that success will finally convince regulators to approve the market’s first spot-based ETF in 2022.
Cryptocurrency-related ETFs turned out to be the two worst-performing ETFs in Australia in 2022, and the same story played out in the United States. According to ETF.com, the four worst-performing US ETFs in 2022 are crypto-related.
Related: Grayscale CEO highlights 20% GBTC share buyback option if ETF conversion fails
Crypto ETFs were seen as the next big step towards mainstream adoption of the crypto industry. However, this was hindered by a prolonged bear market and several negative events in 2020.