CRYP ETF Review: The ASX Finally Has A Cryptocurrency ETF, But Hold Your Horses, There’s A Catch.

Before this reading this CRYP ETF Review any further, please ensure you’ve read and clearly understand our financial disclaimer located at the bottom of this post.

At the beginning of November 2021, the ASX welcomed its very first cryptocurrency ETF. At the time, this was music to the ears of many Aussies, from everyday retail to experienced investors. 

Popular fund manager BetaShares recently launched the ETF (ASX: CRYP) on Thursday, 4 November, and it was met with much hype and excitement. In this article, I’ll be reviewing CRYP’s strengths, weaknesses and everything in between.

CRYP ETF Review.

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Crypto Investors Have Had A Roller Coaster Decade

Back in 2012 — when the most well-known cryptocurrency Bitcoin was at the mouth-watering value of just $5.27 —, nobody could have predicted how the next 10 years would go (no, not even your cousin’s brother-in-law despite his claims at a family birthday party after a couple of lagers). 

Despite the creation of a multitude of cryptocurrencies over the last few years, it’s been difficult for everyday retail investors to get in on the action. This is because they have been listed on alternative trading platforms such as Binance and Coinspot, and not on centralised, national stock exchanges such as the New York Stock Exchange in the U.S. or the ASX here in Australia. But for those in Australia who prefer the safety and security of the ASX, that has now changed (sort of). 

What is an ETF? 

An ETF is an exchange-traded fund, meaning that you are indirectly buying a share — or a fraction of a share — of all the companies that the fund holds. For example, if you purchase Vanguard’s ASX 300 ETF (ASX:VAS)*, you are purchasing a part of all 300 companies (sometimes it holds more) that the fund holds. They are called ‘exchange traded’ because these funds are listed on a particular stock exchange. 

*Read more about VAS in our review here.

What’s the ‘sort of’ all about from before? ‘Splain it to me Lucy!

While you can now gain exposure to the rises and falls of cryptocurrency through the Australian Stock Exchange (ASX), there’s a catch. The fund (ASX: CRYP), doesn’t actually hold any cryptocurrencies directly. So if you want to invest in some popular cryptocurrencies such as Bitcoin, Ethereum or Ripple, you’ll still need to go through alternative trading platforms that specialise in cryptocurrency trading. 

The fund does, however, currently invest in 34 companies that are “at the forefront of the dynamic crypto-economy” according to BetaShares themselves. These companies are major players in the crypto-world, have a big say in its success or failure, and will still reap the benefits (if they are run well of course) if the overall value of major cryptocurrencies rises over time. This is partly because many of them are required to own substantial amounts of cryptocurrency themselves. So basically, you are investing in companies that invest in coins such as Ethereum and Bitcoin. 

How Is Cryp Constructed? 

CRYPs underlying index is cleverly designed to ensure the largest Crypto focused companies, making the most waves in the crypto space are in high concentration. The ETF tracks the Bitwise Crypto Innovators Index. To determine a company’s eligibility within the Index, Bitwise has developed two tiers that each potential constituent must fall within.

Tier 1 companies must comprise at least 85% of the index’s total weighting. To qualify as a tier-one, a company needs to acquire 75% of its revenue from serving crypto markets, and 75% of its net assets need to be accounted for by Bitcoin, Ethereum, or another liquid crypto asset. 

The remaining 15% of the index (capped at 10 holdings) can be occupied by tier 2 companies. Tier 2’s need to have a minimum $10Bn market cap. They’re also required to have at least one significant business unit dedicated to the cryptocurrency ecosystem.

For additional information, I strongly recommend reading section 2.1.5 of the CRYP PDS.

CRYP ETF Review: Performance

Since its launch, CRYPs performance has been nothing short of poor. Unfortunately for CRYP unitholders, its listing in November 2021 coincided with the peak of the 2021 crypto craze.

In 2022, major cryptocurrencies have experienced dramatic falls from their November 21’ peak. This is for a number of reasons including high levels of inflation, rising interest rates and the War in Ukraine.

All this has been bad news for sharemarkets across the globe, especially for growth focussed ETFs like CRYP. In 2022, alone CRYP is down 60%. For comparison, Vanguard’s ASX 300 ETF (ASX:VAS) is down about 6% in May 2022.

Why Is CRYP Down So Much?

Pre-profit high growth shares usually decline further than the broader market during periods of interest rates. This is because their cash flows are further into the future. When interest rates rise, their cash flows are discounted back to at higher rates, making their present value lower resulting in lower prices.

CRYP ETF Review: Price

CRYPs MER of 0.69%* is expensive by anyone’s standards. Especially considering it’s almost 7 times more expensive than Vanguard’s Broad-Based S&P/ASX 300 tracking ETF,  ASX:VAS. 

10,000 Invested in CRYP would cost you.

BetaShares would charge $69 for every $10,000 invested in CRYP. Comparatively,  $10,000 invested in VAS would cost $10 annually. 

CRYP ETF Review: Risk

There are several noteworthy risks associated with CRYP, specifically around the possibility of tightened government regulation, the extreme volatility frequently demonstrated by crypto markets. For more information regarding the risks around Crypto, and the CRYP ETF specifically, I’d recommend reading section 4 of the CRYP PDS.

CRYP ETF Review: Valuation

After its dramatic price decline, the valuation of CRYP, and by definition, its underlying holdings have come back back to earth significantly.

The majority of companies within CRYP are pre-profit, which makes it to apply traditional valuation metrics like the price to earnings (P/E). Instead, the price to sales (P/S) ratio can be used. P/S is commonly used by early-stage growth investors to compare the valuation of investments that are pre-profit.  

CRYPs top 10 holdings, which equates to 61.5% of the ETFs total weighting have an average P/S of 5.9. That translates to investors paying $5.9 for every $1 of sales generated by CRYPs top 10 highest weighted companies.

For context, that’s only about 17% higher than the average P/S of the top 10 companies held within boring ol’ VAS. That’s crazy considering VAS is loaded with slower growing, established businesses and CRYP is full of high-flying Crypto pioneers! Yep. Safe to say that one took me by surprise!

CRYP’s P/S compared to VAS doesn’t nesessarily make the ETF cheap (there are several other valuation techniques that can be applied), it does put its 60% fall in 2022 in persective when compared to the 4.5% YTD fall incrurred by VAS. You know it’s coming into crypto winter when P/S valuations have cratered to ASX 300 levels!

As of May 2022Price to Sales Ratio
HGEN Top 10 Holdings P/S Ratio5.9
VAS (ASX 300) Top 10  P/S P/S Ratio4.9
Table #2: CRYP P/S Ratio (Top 10 Holdings) – Source: Author’s Calculations, data source: Yahoo Finance

CRYP ETF Review: Key Facts 👇

Use the table below to grab all the key facts about CRYP you need to get comfortable with it!

As of 29 April 2022
ETF IssuerBetashares
Management Fee (Incl operational costs)0.67%
Benchmark IndexBitwise Crypto Innovators Index
Dividend Reinvestment PlanAvailable
Income Distribution FrequencyAt Least Annually 
ETF Return Since Inception (Nov 2021)-59.7%
Index 1 Year Return 59.8%
Funds Under Management (FUM)$68.5M
Number of Holdings (ETF)34
Weighting MethodologyMarket Cap Weighted 
Weighting CapsTier 1 companies can comprise at least 85%, and Tier 2 companies can comprise up to 15% of the index (capped at 10 companies)
Listed Since2 November 2021
Top 10 Holdings (highest to lowest concentration)Silvergate Capital Corp, Microstrategy Inc, Galaxy Digital Holdings Inc, Coinbase Global Inc,  Marathon Digital Holdings Inc, Coinbase Global Inc, RIOT Blockchain Inc, Bakkt Holdings Inc, Canaan, Northern Data AG.
Top 10 Holding Concentration67.5% of the total ETF holdings
Table #3 – CRYP Key Facts

*After fees, dividends re-invested. 

Want to know more about CRYP?

You can check out the latest CRYP fact sheet  If you’re keen on doing some general reading. 

Alternatively, CRYPS PDS will give you all the details you’ll need to make an informed decision. 

Final Thoughts on CRYP

When it comes to deciding whether or not an investment in CRYP may be for you, you need to first decide if cryptocurrency is an area you want to have some exposure in, and if so, are you happy with the level — and type — of exposure that this ETF provides. For more ‘bitcoin-bullish’ investors who live and breathe cryptocurrency, this may not be the more risky, direct exposure that you’re after. 

However, if you just want to diversify your current portfolio with a smaller level of exposure to the volatile (and let’s be honest, rollercoaster-like) world of cryptocurrency, then this may be what you’re after. Make sure you do some further research on this fund before you jump in and assess whether its risk profile matches that of your portfolio. While it isn’t exposed directly to the rises and falls of popular crypto-coins, BetaShares still labels this ETF as ‘very high risk’. So buyers beware! Anybody that has invested in cryptocurrency before will tell you to buckle up, because it’s a wild ride.

For full disclosure, the author of this article currently holds shares in CRYP. 

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The information provided in this article is general in nature only and does not constitute personal financial advice about how you should manage your investments. In this article, I intend to provide factual, balanced information without judgment or bias, to the best of my ability.

My financial decisions (or use of a particular service or platform) are personal choices based on their specific circumstances and do not automatically make them appropriate for your personal circumstances. I do not recommend nor endorse any financial or investment product.

My usage or opinion of any product should not be interpreted as an endorsement, advertisement, or intent to influence. I cannot and will not make a guarantee about the performance of any product, and although I strive to keep information on this website accurate and updated as it changes, I make no guarantee about the correctness of reviews or information posted. I am NOT a financial advisor and do not hold an AFSL.

You should also consider seeking the advice of an investment advisor who holds an Australian financial services (AFS) licence or is a representative of an AFS licensee. Be sure to work with someone who understands your investment objectives and tolerance for risk. Your investment advisor should understand these products, be able to explain whether or how they fit with your objectives and be willing to monitor your investment alongside you.  You can find a financial advisor by visiting the ASIC financial adviser register and searching for one in your local area.

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