Which is more risky, spot cryptocurrency ETF or futures ETF?

Spot cryptocurrency ETFs hold physical cryptocurrency, while futures ETFs track the value of futures contracts for physical cryptocurrency.

Feb 20, 2025 at 12:54 am

Key Points

• Spot cryptocurrency ETFs track the value of physical cryptocurrency by holding it in a trust, while futures ETFs track the value of futures contracts that are settled in physical cryptocurrency.
• Spot cryptocurrency ETFs are generally considered less risky than futures ETFs because the underlying asset, physical cryptocurrency, is less volatile than futures contracts.
• Futures ETFs can be more leveraged than spot cryptocurrency ETFs, which can amplify gains and losses and increase risk.

Spot Cryptocurrency ETFs

• Spot cryptocurrency ETFs are passively managed funds that track the value of an underlying cryptocurrency index.
• The underlying cryptocurrency index is typically made up of the top cryptocurrencies by market capitalization, such as Bitcoin and Ethereum.
• Spot cryptocurrency ETFs offer investors a way to gain exposure to the cryptocurrency market without having to purchase and store physical cryptocurrency.
• Spot cryptocurrency ETFs are regulated by the U.S. Securities and Exchange Commission (SEC) and are subject to the same disclosure and reporting requirements as other ETFs.
• Some of the most popular spot cryptocurrency ETFs include the ProShares Bitcoin Strategy ETF (BITO) and the Valkyrie Bitcoin Strategy ETF (BTF).

Futures Cryptocurrency ETFs

• Futures cryptocurrency ETFs are actively managed funds that track the value of futures contracts that are settled in physical cryptocurrency.
• Futures contracts are agreements to buy or sell a certain amount of an underlying asset, such as cryptocurrency, at a predetermined price and date.
• Futures ETFs offer investors a way to gain leveraged exposure to the cryptocurrency market by using futures contracts.
• Futures ETFs can be more volatile than spot cryptocurrency ETFs, as the value of futures contracts can fluctuate more widely than the value of physical cryptocurrency.
• Futures ETFs are also subject to the risks associated with futures contracts, such as counterparty risk and settlement risk.
• Some of the most popular futures cryptocurrency ETFs include the ProShares Bitcoin Strategy ETF (BITO) and the Valkyrie Bitcoin Strategy ETF (BTF).

Comparison of Risks

• Spot cryptocurrency ETFs are generally considered less risky than futures ETFs because the underlying asset, physical cryptocurrency, is less volatile than futures contracts.
• Futures ETFs can be more leveraged than spot cryptocurrency ETFs, which can amplify gains and losses and increase risk.
• Investors should carefully consider their risk tolerance and investment goals before investing in either type of cryptocurrency ETF.

FAQs

• What are the fees associated with cryptocurrency ETFs?

  • The fees associated with cryptocurrency ETFs vary depending on the fund. However, most cryptocurrency ETFs have expense ratios that are comparable to the expense ratios of traditional ETFs.

• How can I invest in cryptocurrency ETFs?

  • Cryptocurrency ETFs can be purchased through a broker or investment platform.

• Are cryptocurrency ETFs a good investment?

  • Whether or not cryptocurrency ETFs are a good investment depends on an individual's risk tolerance and investment goals. Cryptocurrency ETFs can be a good way to gain exposure to the cryptocurrency market without having to purchase and store physical cryptocurrency. However, investors should be aware of the risks associated with cryptocurrency ETFs before investing.