Digital asset ETFs: Simpler access to blockchain and crypto

Headlined by cryptocurrencies (e.g. bitcoin) and blockchain, digital assets are quickly becoming a major investable asset class. Cryptocurrencies alone have a collective market capitalization of over $2 trillion.¹ As investor access to digital assets expands rapidly, Invesco leads the way with our digital asset ETFs.

Investors are exploring the value that digital assets may add to their portfolios. But the idea of choosing from an ever-growing list of cryptocurrencies and navigating the potential risks associated with them may seem daunting. We make it easier for investors to access this growing space. 

Investing in digital assets: Three key questions to guide your journey

Here are three of the most common questions we hear investors asking as they begin exploring digital assets: 

1. Why are people interested in adding digital assets to their portfolios? 

Potential opportunity: In addition to being a large, growing asset class, digital assets are a transformative force shaping economic activity. For example, more large and well-known companies are accepting bitcoin for customer payments and leveraging blockchain technology to streamline their operations. This growing adoption is one reason why digital assets may play a larger role in diversified portfolios.

Potential hedge against inflation: Many investors are attracted to bitcoin, for example, because that cryptocurrency has a finite supply; only 21 million coins can ever be mined—governments can’t just print more of it, like they can with fiat currency. Because of this, digital assets with a finite supply in circulation may have the potential to hedge a portfolio against inflation, potentially like gold. Other cryptocurrencies on the other hand, such as ethereum and tether, have an uncapped supply, which may not be a potential hedge against inflation. It’s important for investors to understand the individual digital assets and do proper research before investing.

Potential diversification: Another potential benefit of digital assets is that they may provide diversification for traditional assets like stocks and bonds. However, in the case of bitcoin, its correlation with stocks has fluctuated over time so we would caution against drawing firm conclusions based on the historical data of such a relatively young, rapidly growing asset class. 

2. Why are some investors hesitant to invest in digital assets?

Cryptocurrencies seem to make headlines nearly every day—both for positive and negative news. The volatile prices of bitcoin and other digital coins often reflect the unpredictability of the asset class’s fast-evolving news cycles. Other common pitfalls of investing in cryptocurrency include forgotten private keys to access digital asset accounts, lost wallets where digital assets are stored and expensive transaction costs.

While these are certainly valid concerns, there are ways investors can better understand their options. As with any emerging asset class, researching the available options as well as the market and regulatory dynamics is critical to understanding the risks and potential upside of digital assets.  Ways to invest in digital assets continue to grow, giving investors more choice in determining the right exposure for them.

3. What are the ways to invest in digital assets?

Targeted exposure through direct investment: Direct ownership of cryptocurrencies through a major crypto exchange

Indirect exposure via derivatives: Access to cryptocurrencies via derivative instruments (e.g. exchange-traded futures)

Broad exposure to the ecosystem: Access to companies that engage in cryptocurrencies and leverage blockchain technology

Direct exposure via an exchange-traded product (ETP) – Provides direct exposure, while helping to mitigate the risk of managing personal digital wallets and dealing with unregulated crypto platforms.

There are several approaches to add digital asset exposure to a portfolio. The most straightforward way is to simply buy an actual cryptocurrency and hold it as an asset. In addition to direct ownership of cryptocurrencies, investors can also own derivatives, which are financial instruments whose value is based on the price of an underlying cryptocurrency. For example, certain investors can buy futures contracts (a contract to buy the underlying asset at a pre-determined future price that can be traded before the contract ends) on bitcoin, which gives them exposure to the underlying digital asset without having to physically own it.

Cryptocurrencies themselves, however, represent just one portion of the potential economic value created by digital assets. Investors can also invest in companies that provide technology or tools related to digital assets, as well as companies that could benefit, either directly or indirectly, from blockchain or the shift to decentralized finance. Decentralized finance (also known as DeFi) describes a system in which financial transactions are made directly between buyers and sellers without the need for banks or other centralized financial institutions.

Creating diversified exposure to digital assets and companies involved in that industry may seem challenging. To do this, investors would have to research and own individual stocks of companies that have varying exposure to digital assets, in addition to owning a collection of cryptocurrencies or derivatives. However, that’s where ETP come in. ETP can provide investors exposure to narrow or broad aspects of the digital asset ecosystem, all through well-known vehicles that are efficient to own and trade.

Invesco digital asset ETFs: Simplified access to unique opportunities

Blockchain, cryptocurrency, and other digital assets have broad implications across the global economy. At Invesco, we believe that investors should have an array of tools to easily access and create a diversified exposure to digital assets. That’s why we created the Invesco digital asset ETFs.

Invesco partnered with Galaxy Asset Management and Alerian to develop three innovative strategies for accessing this transformative, emerging asset class.

Galaxy Asset Management is a leading financial services innovator in the digital asset, cryptocurrency, and blockchain technology sectors and provides cutting-edge insights into investible opportunities across the digital asset ecosystem. 

Alerian is a pioneering index provider that has built innovative indexes that Invesco Digital Asset ETFs track.

Consider adding digital assets to your portfolio

Are you looking for investment opportunities related to cryptocurrencies or exposure to the broader blockchain ecosystem? Invesco offers ETFs that can give you simplified access and diversified exposure to digital assets in one fund.

• Invesco Galaxy Bitcoin ETF (BTCO)
  Designed to help investors get secure, convenient exposure to the world’s largest cryptocurrency.

• Invesco Alerian Galaxy Crypto Economy ETF (SATO)
  Targets key segments of the crypto economy—miners, enabling technologies, buyers and crypto trusts and exchange traded products (ETPs)

• Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF (BLKC)
  Designed to help investors get secure, convenient exposure to the world’s largest cryptocurrency.