How to Invest in 'Bitcoin ETF' in Korea

Global ETF

Futures-based US 'BITO' is Representative

Coin-related Theme ETFs are also Possible

Recently, cryptocurrencies are taking up a larger share in the global exchange-traded fund (ETF) market. Since several spot Bitcoin-based ETFs were listed in the U.S. last January, the asset size of spot Bitcoin-based ETFs has reached $120 billion (about 176 trillion won) as of now. Among them, BlackRock's 'iShares Bitcoin Trust (IBIT)' has risen to 32nd in asset size among over 4,000 U.S. ETFs within a year of its launch.

However, domestic investors cannot invest in spot Bitcoin ETFs. Instead, if you want to invest in cryptocurrency themes in the ETF market, there are several alternatives. It is a method of indirect investment.

First is the futures-based Bitcoin ETF. 'ProShares Bitcoin Strategy (BITO)' is representative. It uses Bitcoin futures traded on the Chicago Mercantile Exchange (CME) as its underlying asset. Since it follows the movements of derivative contracts, there is a difference from spot ETFs. Last year, there was a significant gap between Bitcoin price movements and BITO stock performance.

Next is buying a basket of theme stocks related to the cryptocurrency industry as an ETF. It is a strategy to invest in companies related to blockchain and cryptocurrency industries and themes. A representative example is 'Amplify Transformational Data Sharing (BLOK)'. It invests in cryptocurrency trading, mining-related companies, and semiconductor companies.

You can also use a strategy of buying ETFs related to companies that hold a lot of Bitcoin. Last year, as Bitcoin prices surged, the stock price of MicroStrategy, which holds a lot of Bitcoin, soared. You can invest in 'Bitwise Crypto Industry Innovators (BITQ)', a theme ETF with a high proportion of this company, and approach it tactically in the short term with leverage methods that track the movement of a single MicroStrategy stock twice, such as 'Daily Target 2X Long MSTR (MSTX)'.

There are also leverage ETF strategies for Bitcoin and Ethereum. Last year, domestic investors heavily bought '2X Bitcoin Strategy (BITX)' and 'ProShares Ultra Bitcoin (BITU)'. The former tracks the CME Bitcoin futures index, and the latter tracks the Bloomberg Bitcoin index at twice the daily volatility. Since leverage ETFs should be used for momentum investment in the short term, be cautious about long-term holding.

Eun-Hye Lim, Senior Researcher at Samsung Securities