My last Alitalia flight (the airline has declared bankruptcy) pic.twitter.com/tmrqpGAjHs
14 October, 2021 - 03:02pm
The frenzied buying and selling of cryptocurrencies remain unstoppable – and that's despite the Securities and Exchange Commission's best attempts to slow the crypto train.
The fund provider community has been toiling to get a Bitcoin exchange-traded fund (ETF) to market, and so far, it has been in vain. At the moment, more than 20 cryptocurrency ETFs are under review by the SEC, which has taken to kicking this can down the road.
For instance, on Dec. 30, 2020, VanEck filed for a Bitcoin ETF that would invest directly in bitcoins. However, in mid-September, the SEC delayed its decision on the VanEck Bitcoin Trust for an additional 60 days. It's now expected to approve or reject the proposal by Nov. 14. The SEC filed its 60-day extension notice on the last day of the approval process – the SEC has 180 days to render a decision on a filing with a 60-day extension if required – so it appears the regulator intends to wait until the very last moment to weigh in.
SEC Chair Gary Gensler has said that he would prefer to see funds holding Bitcoin futures rather than the cryptocurrency itself. There are plenty of candidates already: ProShares, Invesco, Valkyrie, AdvisorShares, Ark Invest and VanEck are among names that have filed for futures-linked Bitcoin ETFs.
For now, investors will have to make do with other strategies.
Here are 11 Bitcoin ETFs and other cryptocurrency funds available to investors today. For the most part, these products deal in equities that are somehow involved with cryptocurrencies, though a couple provide more direct exposure … albeit with their own twists and turns.
We'll start off with a couple of funds that are ETF-like, in that they trade throughout the day, but not quite ETFs.
The Grayscale Bitcoin Trust (GBTC, $44.65) is neither a mutual fund nor an ETF. Instead, it's what's described as a closed-end grantor trust. This means that it issues a fixed number of shares when it goes public, and then those shares are traded "over-the-counter" (OTC).
GBTC shares are intended to follow the price of Bitcoin based on the CoinDesk Bitcoin Price Index. At the moment, each share of the Grayscale Bitcoin Trust represents 0.00093535 bitcoins, but that number isn't fixed. That's because, unlike an ETF, closed-end trusts such as GBTC can trade at a discount or premium to their underlying assets.
That has been the case with GBTC ever since its launch (as the Bitcoin Investment Trust) in 2013. Today, the Grayscale Bitcoin Trust trades at a 14% discount to the NAV of the bitcoins held by the Trust, meaning you were effectively buying bitcoins for 86 cents on the dollar. At the other end of the spectrum, it traded at a 40% premium in December 2020.
Grayscale Investments manages more than $38 billion in digital currency assets, with bitcoins representing most of those assets.
Investors concerned about fees might not like the fact the trust charges a 2% management fee. That's sky-high compared to an average fee of 0.53% for ETFs, and still lofty compared to the average fee of 1.42% for mutual funds.
However, when you consider that it can cost as much as 1.49% to buy or sell bitcoins directly, and the average holding time for Coinbase buyers and sellers is 53 days, the argument against high fees isn't nearly as clear-cut.
One last thing to note: Grayscale Investments hired David LaValle as its global head of ETFs. He will be in charge of Grayscale's attempt to convert GBTC from a trust into an ETF at some point. Because of how ETFs are structured, a conversion would most likely eliminate the premium/discount issue.
The Amplify Transformational Data Sharing ETF (BLOK, $48.62) is similar to many U.S. cryptocurrency ETFs in that it is primarily invested in equities, but it does have a sneaky way of providing a little more "direct" exposure.
BLOK is an actively managed fund that aims to invest at least 80% of its assets in companies that are involved in developing blockchain technologies, and/or using them for their own business.
The ETF has 47 holdings, the top 10 of which account for about 45% of assets. Included in that number are MicroStrategy (MSTR), the data analytics software company that's become more known for its Bitcoin investments than its existing business; Bitcoin miners such as Marathon Digital (MARA) and Hut 8 Mining (HUT); and Coinbase Global (COIN), one of the world's leading cryptocurrency exchanges that went public in April.
However, a few interesting holdings are found outside of the top 10. Specifically, BLOK invests in the Purpose Bitcoin ETF (two listings, one in Canadian dollars, and one in U.S. dollars), as well as the 3iQ CoinShares Bitcoin ETF – all of which are Canadian ETFs that directly track Bitcoin.
Breaking down the blockchain industry allocation, BLOK's top three are crypto miners (28%), venture capital (10%), and exposure (10%). Exposure represents the three ETFs mentioned in the previous paragraph.
BLOK is also diversified across size: 45% of assets are large-cap stocks or ETFs, 21% are mid-cap and 33% are small-cap or unclassified. That makes for an average market cap of $7.9 billion.
The Bitwise 10 Crypto Index Fund (BITW, $50.25), launched in 2017, tracks the performance of the Bitwise 10 Large Cap Crypto Index, representing the 10 largest investable cryptocurrencies. These 10 cryptocurrencies account for 70% of the total crypto market.
Because BITW is weighted by market capitalization, Bitcoin accounts for 65% of the portfolio. That's more than double Ethereum, at 25%. Cardano is a distant third at 4%.
BITW only became available over-the-counter in December 2020. It began trading with just $120 million in assets – less than a year later, it has 10 times that, indicating just how popular these instruments have become.
Its press release announcing its OTC availability explained how it works relative to an open-ended mutual fund or ETF.
"The Bitwise 10 Crypto Index Fund is an open-ended, publicly traded statutory trust, not an exchange-traded fund or closed-end fund," Bitwise Asset Management stated in December 2020. "Accredited investors may create shares of the Fund at net asset value (NAV) through private placement. Those restricted shares may then become eligible for public sale after a 12-month holding period."
While the Bitwise 10 Crypto Index Fund is built differently than GBTC, it can still sell at a premium or discount to the net asset value per share. BITW currently trades at a 10% discount to NAV.
The Siren Nasdaq NexGen Economy ETF (BLCN, $46.12 is a passively managed (read: index) ETF that tracks the performance of the Nasdaq Blockchain Economy Index, which is made up of stocks that support blockchain technology or utilize it for their own businesses.
BLCN, launched in January 2018, has 63 holdings. The index starts with all companies larger than $200 million in market cap that exhibit "blockchain company" characteristics. It then assigns them a "blockhain score" – the index's proprietary screening methodology that scores each company based on their ability to benefit from blockchain technologies.
The ETF is reasonably diversified. The top 10 holdings account for just 20% of its overall assets. Silvergate Capital (SI) – which provides loans and banking services to companies related to cryptocurrencies, the blockchain and fintech – is the largest holding with a weighting of 2.6%. Silvergate provides loans and banking services to companies related to cryptocurrencies, the blockchain, and fintech.
The top three sectors are technology (43%), financials (33%) and communications (11%). And BLCN is very much a "global" fund – the U.S. accounts for 53% of assets, with the rest coming from other nations including Japan (13%) and China (13%).
The First Trust Indxx Innovative Transaction & Process ETF (LEGR, $43.03) is another equity-based cryptocurrency ETF, one that launched in 2018. It tracks the performance of the Indxx Blockchain Index, an index that follows companies that have some connection to blockchain technologies – and it has an interesting weighting methodology.
LEGR's index takes all available blockchain companies and ensures that each holding meets specific size, liquidity and trading minimums. It then applies a score of 1 for companies actively developing blockchain technology, 2 for companies actively using blockchain technology, and 3 for companies actively exploring blockchain technology.
The index then only includes companies scoring 1 or 2, giving 50% of the weighting to firms scoring 1, and 50% to those scoring 2. Companies scoring 3 are excluded altogether. The portfolio is capped at 100 stocks, and the index is rebalanced and reconstituted twice a year.
The ETF's top three sectors are financials (39%), technology (32%), and consumer discretionary (9%). The top three countries are the U.S. (34%), China (12%), and India (7%). This also is a large-cap-heavy fund, with a median market cap of almost $94 billion.
The Simplify US Equity PLUS GBTC ETF (SPBC, $26.89) offers very diluted exposure to Bitcoin, but that's by design.
This fund, which launched at the end of May, has already gathered more than $100 million in assets by "giving it 110 percent." That is, SPBC manages to provide a 100% investment in equities along with an additional 10% exposure to Bitcoin.
Most of SPBC's market exposure is achieved through holding the iShares Core S&P 500 ETF (IVV), which is one of the major S&P 500 ETFs. However, it also invests a little of its assets into E-mini S&P 500 Futures, which provides much more exposure to the broader market than the ETF can provide. That allows it to invest an additional 10% to a maximum 15% in the Grayscale Bitcoin Trust, which we discussed earlier in this article.
For decades, allocation funds have acted as a "portfolio in a can," providing investors with bond and stock exposure in a single product. Consider SPBC a more modern iteration of that for people who believe it's important to be invested in both the stock market and cryptocurrencies.
Bitwise Crypto Industry Innovators ETF (BITQ, $23.95) is another equity-focused cryptocurrency ETF. This index fund tracks the performance of the Bitwise Crypto Innovators 30 Index, created by Bitwise Index Services LLC, which is an affiliate of Bitwise Asset Management – the world's largest crypto index fund manager.
To make it into the index, a company must generate at least 75% of revenues from the cryptocurrency ecosystem, or have 75% of their net holdings in Bitcoin or some other liquid crypto asset. These are considered "crypto innovators" and account for 85% of the index holdings. The remaining 15% of the fund is made up of non-Innovators that are at least $10 billion in market cap and either have a dedicated business initiative focused on the crypto ecosystem, or hold at least $100 million in Bitcoin, Ethereum or another liquid crypto asset.
BITQ, which launched on May 21, has 30 holdings, as the name of the benchmark implies.
The argument for buying this new ETF is three-fold: It gives you exposure to the crypto market without owning crypto assets directly; it gives you exposure to the companies building the crypto infrastructure such as Bitcoin miners, trading platforms, etc.; and lastly, it gives you a piece of global cryptocurrency players such as Coinbase.
BITQ carries many of the same stocks as the other funds on this list – names like MicroStrategy, Galaxy Digital (BRPHF) and Silvergate. But because of the concentrated nature of the 30-stock portfolio, the top 10 stocks account for a massive 64% of assets.
If you have real conviction in the cryptocurrency movement, BITQ is one of the best equity ETFs you can use to express it.
The Global X Blockchain ETF (BKCH, $25.89) looks to invest in companies that benefit from the global blockchain solutions market, which IDC believes could surpass $19 billion by 2024.
BKCH tracks the performance of the Solactive Blockchain Index, a collection of stocks that have operations that utilize or benefit from digital assets and blockchain technologies. It divides the companies into three groups: 1.) "pure-play" stocks that derive at least 50% of revenues from blockchain activities; 2.) "pre-revenue" firms whose primary business is in blockchain technology but don't yet generate revenue; and 3.) "diversified" companies that generate less than 50% of revenues from blockchain activities.
The index is weighed by free float market cap, but it also has a few rules it enforces at each rebalancing. No component can account for more than 12% of the portfolio and no less than 0.3%. All stocks with a weighting of greater than 4.5% can't collectively account for more than 45% of the portfolio, with the remainder capped at 4.5%. And pre-revenue firms and diversified companies can't make up more than 10% of the firm collectively, and individually can't be weighted any more than 2%.
Technology is BKCH's largest sector by far, at 72% of assets, followed by financials (15%) and communication services (7%). The U.S., Canada, and China account for almost 92% of the portfolio. Marathon Digital is the largest holding with a weighting of more than 17%, followed by Coinbase at a little more than 12%; at those weights, both stocks would have to be trimmed down to the 12% limit at the next rebalancing.
The VanEck Digital Transformation ETF (DAPP, $25.55) is another newer cryptocurrency ETF launched in April 2021, which helps to explain why assets are still on the low side.
DAPP tracks the performance of the MVIS Global Digital Assets Equity Index, which invests in companies participating in the digital assets economy. Holdings are believed to have the potential to generate at least half of their annual revenue from digital assets. And like BITQ, this is a focused portfolio with just 25 holdings; the top 10 account for 64% of total assets.
Three-quarters of the portfolio is invested in technology stocks, with most of the rest invested in financials and a tiny remainder allocated to cash. It's another global fund, too, with the U.S. at 62% of assets, followed by Canada (14%), China (13%) and a smattering of other countries.
This is a small portfolio, but one that's well diversified among stocks of all sizes. Companies $5 billion and larger account for 24% of the fund's assets, those between $1 billion and $5 billion account for 45%, and sub-$1 billion firms account for the remaining 31%.
DAPP's 0.50% expense ratio is reasonable in relation to most existing cryptocurrency ETFs.
While a Bitcoin futures ETF has yet to be approved, the SEC has given the green light to a Bitcoin futures mutual fund.
The Bitcoin Strategy ProFund Investor (BTCFX, $35.42), launched in late July, seeks capital appreciation by investing in Bitcoin futures contracts. It also can invest in Canadian ETFs that invest in Bitcoin directly, and if it wants, it can invest in money market instruments such as U.S. Treasuries.
BTCFX features a low $1,000 minimum initial purchase, as well as a moderate 1.15% expense ratio. Worth noting is that 31 basis points of those fees are interest expenses related to borrowing done by the managers as part of its strategy. (A basis point is one one-hundredth of a percentage point.)
Suppose you're looking to bet on Bitcoin but don't want to own it directly. Then, BTCFX is a way to gain exposure while leaving the heavy lifting to professional investors.
ProFunds was founded in 1997 with the premise that leverage, when used correctly, can magnify gains. But investors should know that the techniques practiced by its managers are high-risk, high-reward – they're not for novice investors.
The First Trust SkyBridge Crypto Industry and Digital Economy ETF (CRPT, $20.03) seeks to invest in companies driving innovation in the cryptocurrency world and digital economy. And it only launched a few weeks ago, on Sept. 20, so it's easy to see why it has so few assets under its belt.
CRPT plans to invest at least 80% of net assets in "crypto industry companies" and "digital economy companies," with at least 50% of assets going toward the former.
The ETF is sub-advised by SkyBridge Capital II LLC, an alternative investment manager founded by Anthony Scaramucci, the one-time White House communications director for Donald Trump.
"We believe that cryptocurrency adoption represents the biggest macro trend since the commercialization of the internet, and we are excited to offer investors access to a portfolio of the leading companies in this eco-system," Scaramucci said in the ETF's press release announcing its launch.
This First Trust fund is similar to a few of the other Bitcoin ETFs on this list in that it has a concentrated portfolio of 30 holdings, with the top 10 accounting for 60% of assets. Top names such as Marathon Digital, Coinbase and MicroStrategy should be familiar at this point, too. The top industries by weight are software (35%), capital markets (24%) and IT services (15%). And the median market cap is about $4.6 billion, with CRPT spreading its assets across firms of all sizes.
14 October, 2021 - 03:00pm
Italy’s new flagship airline takes to the skies on Friday with the travel industry still reeling from the coronavirus crisis and low-cost rivals targeting its home market in a bid to lure away passengers.
The tough operating conditions mean Italia Trasporto Aereo faces trying times from day one as it replaces fallen national icon Alitalia, which ended flights Thursday after decades of losses and numerous brushes with bankruptcy.
State-backed ITA will use planes from Alitalia and be armed with its well-known name, after securing the brand’s purchase for €90 million on the eve of its debut. But the new airline will employ only around 2,800 of its predecessor’s 10,000-plus staff, operating a simplified network to keep down costs and help it turn a profit once demand recovers from the pandemic.
Leading the startup is Chairman Alfredo Altavilla, who made his name as a close aide to Sergio Marchionne in his turnaround of carmaker Fiat and its subsequent purchase of U.S.-based Chrysler. The 58-year-old executive was handpicked for the airline role by Italian Prime Minister Mario Draghi’s government.
ITA will initially operate 52 planes, about half the number at Alitalia, increasing to 78 next year. Growth will be spurred by an outline deal last month for 59 purchased or leased jets, all of them Airbus SE models, helping to trim crew expenses by maximizing interoperability.
Even before the challenge of competing for customers, the new airline has endured a tortuous journey to reach its launch.
On the one hand, ITA has been at pains to show it will be financially self sufficient and represent a clean break from Alitalia in order secure regulatory signoff. Margrethe Vestager, the European Union’s antitrust chief, finally gave her backing last month, while outlawing subsidies paid to Alitalia.
At the same time, staff have been up in arms over ITA’s reduced workforce and new contracts, staging protests in Rome.
The company has inherited only direct airline employees from the old Alitalia, with the group’s maintenance and ground-handling operations subject to a tender offer as a result of the EU settlement.
Yet the business saw value in taking back the Alitalia name – at a discount from the original €290 million asking price – after Vestager insisted it be sold to the highest bidder. The Alitalia identity still has resonance and is seen as a useful marketing tool in international markets.
The public has meanwhile been lukewarm in its backing for a new carrier set to receive €1.3 billion in government funds on top of more than 5 billion euros splurged on Alitalia. The company first entered bankruptcy in 2008, and has been kept on life support with taxpayer proceeds.
Italians have suggested the money should be funneled into health care or education instead. But still, the emotional pull endures for a brand that at one time was synonymous with the glamour of “La Dolce Vita” and Hollywood stars jetting off to a Roman holiday.
“I consider it like a family thing – well, a pretty costly family, but a family thing,” Draghi said in April.
It will be up to ITA to carve out its place in a market that’s already well-served. Global airlines offer plenty of long-distance flights from Rome and Milan, while those cities and others have good European links through a host of carriers including Ryanair, EasyJet and Wizz Air.
The discounters boosted their presence in Italy with the easing of Covid-19 travel curbs, even as the government haggled with Brussels.
The government, though, says that Italy needs its own network airline to support tourism in what is the world’s fifth-most visited country.
While Ryanair Chief Executive Officer Michael O’Leary has questioned the state’s role in building the new airline out of Alitalia assets, established carriers aren’t exactly quaking at ITA’s debut.
The company is likely to “go badly, as all the other Italian carriers before,” Wizz CEO Jozsef Varadi said in an interview Tuesday.
“I’m not seeing any change here, that’s a government-owned entity,” he said. “And they are basically inheriting the labor context of Alitalia and all the inefficiencies of that airline. You can’t expect much from those guys.”
Italy’s Economic development minister, Giancarlo Giorgetti, said in June that ITA must find a partner to flourish, with Delta Air Lines CEO Ed Bastian saying this month that discussions are underway over a possible alliance.
Delta’s existing North Atlantic partnership, of which Alitalia was a member, includes Air France-KLM and Virgin Atlantic Airways.
Even ITA’s own projections see years of struggle ahead before the carrier starts making money.
According to a revised business plan presented to lawmakers this month, ITA no longer expects to report a profit by 2023, envisaging instead a loss before interest and tax of €33 million, before clawing its way into the black the following year.
“It’s very difficult to make profit on domestic markets, particularly if you’ve got a combination of Ryanair and EasyJet, and presumably Wizz Air at some point, eating your lunch,’ said Peter Morris, chief economist at aviation consultancy Ascend by Cirium.
This article is published under license from Bloomberg Media: the original article can be viewed here
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