There are many ways to gain exposure to cryptocurrencies. We've discussed several before, but today, we will focus on some of the top crypto Exchange Traded Funds (ETFs).
Many people get confused or nervous about things like a digital wallet, blockchain technologies, cryptocurrency exchanges, and just digital assets in general.
So, the fact that you can go into your brokerage account like Questrade, Qtrade, or even Wealthsimple Trade and buy cryptocurrencies in a single click of a button is a bonus.
As Canadians, we are fortunate to have several Canadian ETFs covering the most popular cryptocurrencies in the industry on the Toronto Stock Exchange. Countries like the United States have dragged their feet when it comes to ETFs to own crypto assets. Although the SEC (Securities Exchange Commission) may change their mind eventually, they haven't yet. As a result, Canadians have many opportunities that other investors do not.
Should I buy a cryptocurrency ETF or simply the cryptocurrency itself?
Many experienced investors and those learning how to buy stocks looking to add cryptocurrency to their investment strategies often already have an account set up. Whether it be a TFSA, RRSP, or cash account, you can buy crypto ETFs with a single click of a button.
There is certainly a convenience factor when it comes to cryptocurrency ETFs. And another large benefit to purchasing the ETF, especially in a tax-sheltered account, is that your gains will be tax-free.
The same cannot be said if you buy cryptocurrency on a platform like Bitbuy. Although you can claim capital losses if your crypto investment goes south, you will also be forced to pay capital gains if you sell for profit.
Simply put, you need to weigh the pros and cons of purchasing cryptocurrency in a taxable account or taking advantage of the tax opportunity and buying these crypto ETFs in a tax-sheltered account.
ETFs also provide additional diversity and exposure to several pieces of a single industry or multiple industries in some more popular ETFs, such as VBAL or VGRO in Canada.
These are the best cryptocurrency ETFs in Canada today
- Purpose Bitcoin ETF (TSE:BTCC)
- CI Galaxy Bitcoin ETF (TSE:BTCX)
- Purpose Bitcoin Yield ETF (TSE:BTCY)
- Purpose Ether ETF (TSE:ETHH)
- CI Galaxy Ethereum ETF (ETHX)
- Purpose Ether Yield ETF (TSE:ETHY)
- Evolve Cryptocurrencies ETF (TSE:ETC)
Purpose Bitcoin ETF (TSE:BTCC)
Let's start with the mother of all cryptos – Bitcoin. Canada beat the US to the market with one of the world's first Bitcoin ETFs, and that distinction belongs to the Purpose Bitcoin ETF (BTCC). While Purpose has one of the higher fee structures (capped at a MER of 1.5%), it is our top choice as it is the largest fund in its class, with $827M in assets under management.
It was the first to market and remained the most popular among investors, so we will overlook high expenses.
The fund is backed by actual Bitcoin held in cold storage and aims to replicate the daily price movements of Bitcoin. What also makes Purpose's product unique is that there are several options for investors:
BTCC.B: CAD non-hedged product. The most popular of all the options available.
BTCC.U: USD product.
BTCC: CAD Hedged to the US Dollar.
BTCC.J: Carbon Offset non-hedged product. This one is aimed at those who want to ensure that the Bitcoin sourced is not harming the planet. Purpose utilizes a portion of the MER fees to purchase carbon credits which are used to cancel out the fund's carbon footprint. It is estimated that offsetting fees are roughly 0.10-0.20% for BTCC.J.
Overall, if you're looking for exposure to Bitcoin while buying one of the larger funds in Canada, Purpose will be the one you want to look at.
CI Galaxy Bitcoin ETF (TSE:BTCX)
Suppose you're looking for a lower-fee alternative to Purpose's fund. In that case, the CI Galaxy Bitcoin ETF (TSE:BTCX) is an excellent choice. Although this fund isn't as large as Purpose, with assets under management of only $205M, it is still a very large fund.
Management fees are the primary difference between a fund like BTCC and BTCX. You only pay around 0.85% in MER with BTCX.
The fund also has 2 tickers you can choose from, BTCX.B, which is the ETF that trades in Canadian dollars, and BTCX.U, the ETF that trades in US dollars.
Remember that these funds are not hedged, and CI currently does not offer a hedged version of a Bitcoin ETF. Suppose you are looking for funds that can give you exposure to Bitcoin and reduce overall volatility with currency hedging. In that case, you'll likely have to look to Purpose at this point in time.
Purpose Bitcoin Yield ETF (TSE:BTCY)
For those looking for a bit of yield with their cryptocurrency, Purpose has two funds you could consider looking into. We'll talk about BTCY in this section and the other one when discussing a few Ethereum ETFs.
Of note, these funds have performed very poorly since their inception. Although owning cryptocurrency and generating a yield seems enticing, it has proven more difficult than imagined. Purpose's funds lag behind the cryptocurrency they benchmark against by wide margins.
In short, this fund will expose you to Bitcoin and an income stream from the fund managers selling covered call options on the cryptocurrency. The end effect of this? You will generate a yield but limit your potential upside if the cryptocurrency goes up.
I won't go into why in this article, as the covered call strategy requires an entire article alone. But in the simplest explanation possible, They're agreeing to possibly sell their Bitcoin to a buyer at a fixed price in the future for a cash payment now. If the price of Bitcoin remains below that set price, the options contract will expire useless, whereas if it goes above the set price, they will be forced to sell their crypto at less than market value.
The premiums they generate from this strategy are how they pay your income. The fund has a MER of around 1.28%, meaning you'll pay $1.28 annually for every $1000 invested in the fund. It also has assets under management of just $50M, making it one of the smallest funds on this list.
At the time of the update, the fund yields only 9%.
Purpose Ether ETF (TSE:ETHH)
Much like BTCC, which tracks the price movements of Bitcoin, Purpose has an ETF that tracks the price of Ethereum, the Purpose Ether ETF (TSE:ETHH).
With Ethereum not being as popular as Bitcoin, it is unsurprising that the fund's assets under management come in at only $250M, a far cry from the $800M~ in BTCC. The management expense ratio comes in at 1.48%, meaning you'll pay around $14.80 per $1000 you have invested in this fund every year. Considering that a low-cost index fund typically requires you to pay anywhere from $0.40 to $0.80 per $1000 invested, you can see how high the fees are for these niche ETFs.
The fund is relatively simple. It will track the price of Ethereum to the best of its ability. Because this is a hedged fund, you will not be exposed to the price movements in CAD/USD, but only the price of Ethereum. Currency hedging is a personal preference and something everyone must figure out independently.
Much like the Purpose Bitcoin ETF, this fund has a variety of choices for those who want different structures.
ETHH.TO: The currency hedged, the Canadian dollar traded version.
ETHH.B.TO: The non-currency hedged, the Canadian dollar traded version.
ETHH.U.TO: The non-currency hedged, US dollar traded version.
CI Galaxy Ethereum ETF (ETHX)
CI Galaxy Ethereum ETF (ETHX) is the largest Ether ETF in the country. The ETF's investment objective is to expose holders of units to Ether through an institutional-quality fund platform. It aims to track the daily price movements of Ether (ETH).
The fund has $441M in assets under management and a low management fee of 0.8% - one of the lowest among all Ethereum-listed ETFs. With this ETF, you truly get the largest and one of the cheapest options out there.
There isn't much more to be said about the fund outside its low-cost structure. The only thing I will highlight is that it has a Canadian and US version. If you'd like to buy the CAD version, stick with ETHX.B.TO. If you want the US dollar version, look to ETHX.U.TO.
Purpose Ether Yield ETF (TSE:ETHY)
Much like their Bitcoin yield ETF, the Purpose is to develop another fund for those to get exposure to the price movements of Ethereum and generate income in the process.
Because we speak on the strategy in the Purpose Bitcoin section (scroll upwards to read about it), we won't go over it inside this area.
For the most part, these two funds are identical outside of one key differentiator: the cryptocurrency they track. They both have the same yields and the same management fees.
Suppose you're comfortable giving up some of the upside potentials of cryptocurrency to generate income. In that case, these are ETFs you'll want to have a look at.
Evolve Cryptocurrencies ETF (TSE:ETC)
Can't decide between Bitcoin and Ethereum? Why not go with the first multi-coin ETF in Canada. Evolve's Cryptocurrency ETF (ETC) provides investors with one convenient way to obtain exposure to cryptocurrencies and gain exposure to Bitcoin and Ethereum.
While the NAV is small at only $19.7M, the fund only launched in September of 2021 and is not yet well known. It is, however, an excellent way to cover both coins in one simple product.
The fund MER is high, and the fund will likely need to collect more assets before lowering it. At the time of writing, the MER comes at 1.71%, meaning you'll pay $17.10 per $1000 invested every year. Much like the other crypto ETFs on this list, it also has both a CAD unhedged (ETC) and USD series (ETC.B).
It is important to note that it is not a perfect 50/50 split. As of writing, the fund was ~71% Bitcoin and 29% Ethereum. As you can see, the product is still heavily weighted towards Bitcoin.
In other words, this is a product for those wanting to be overweight BTC but don't want to miss out on owning Ethereum in their portfolio. Considering this fund is relatively small and recently launched, there really isn't much competition in the space, so there are no alternatives at the time of writing.