In the past year, there has been a significant surge in interest in Cryptocurrency Exchange-traded Funds (ETF) of various types, including those replicating cryptocurrencies and indices, as well as those investing directly in digital assets. We’ve decided to investigate the current status of crypto ETFs and select top five crypto funds based on the Risk Shell’s FlexiRank framework.
The initial challenge we encountered was the ambiguous classification of ETFs associated with crypto assets. Currently, the only ETF category linked to crypto assets is Digital Assets, but not all funds within this category are true crypto funds. For instance, while the Amplify Transformational Data Sharing ETF is categorized under Digital Assets, it actually invests in “the equity securities of companies actively involved in the development and utilization of ‘transformational data sharing technologies’." Many crypto funds are categorized under categories under Sector Equity, Equity Global Technology, Equity World Other, Other or Alternative Other categories as shown in the table below. To find true crypto ETFs we had to analyze trading strategies and asset exposures of over 10K global ETFs falling into the following categories:
- Replicating cryptocurrencies and crypto indices
- Investing in digital assets
This encompassed approximately 90 active listed ETFs, with only 57 of them having historical returns over 2 years.
Crypto ETF: Search Results
We excluded defunct or liquidated funds, along with those that haven't reported performance updates for the past four months. To perform risk assessement of crypto ETFs, we included only funds with more that 2 years historical returns. The results are summarized in the following table:
| Fund Categories | Number of Funds |
| Alternative Other | 6 |
| Digital Assets | 10 |
| Equity Global Technology | 1 |
| Equity World Other | 1 |
| Global Equity | 1 |
| Global Fixed Income Balanced | 1 |
| Other | 31 |
| Sector Equity | 3 |
| Sector Equity Technology | 3 |
The issue of ambiguous classification for crypto funds, which lack dedicated crypto asset classes, needs to be addressed by ETF data vendors. This can be achieved by creating a series of crypto asset classes and subclasses.
Top 5 Cryptocurrency ETF
Cryptocurrency ETFs present a hugely diverse asset group with polar risk-return profiles. Take a look at the following chart (VaR and Maximum Drawdown statistics) showing risk-return profiles of cryptocurrency funds over the last two years.
It's clear that the group includes both highly risky funds, with Maximum Drawdowns of up to 100% and VaR as low as -60%, as well as medium risk funds. To identify the top-performing funds, we used Risk Shell’s FlexiRank™ metrics, which incorporated the following risk statistics calculated over the time period of the last 2 years:
To select top best funds, we used Risk Shell’s FlexiRank™ metrics which included nine ranking risk statistics calculated over the time period of the last 3 years:
- Mean RoR
- VaR95
- Maximum Drawdown
- Time-Under-Water
- Stress Drawdown Average
- Stress Drawdown Maximum
- Semi-deviation
- Downside Deviation
- Positive Return Ratio
When calculating stress statistics, we took into account 31 historical extreme events since 1998. The top 5 Crypto ETF and their Flexi ranks are listed in the following table:
| Funds | FlexiRank™ | Percentiles | ||||||||
| Mean | VaR95 | MaxDD | TUW | Stress~ | Stress^ | SemiDev | DownDev | Positive % | ||
| First Trust IndxxInnvtvTrsctnandPrcssETF | 36.296 | 0.282 | 0.945 | 0.949 | 1.000 | 0.477 | 0.806 | 0.968 | 0.976 | 0.857 |
| Global X Fintech & Blockchain ETF | 31.875 | 0.306 | 0.888 | 0.883 | 0.647 | 0.481 | 0.789 | 0893 | 0.917 | 0.571 |
| VanEck TRON ETN A | 30.444 | 0.414 | 0.738 | 0.703 | 0412 | 0.466 | 0.796 | 0.765 | 0.797 | 1.000 |
| CI Galaxy Multi-Crypto ETF USD | 25.571 | 0.395 | 0.788 | 0.654 | 0.294 | 0.784 | 0.925 | 0.813 | 0.832 | 0.429 |
| 3iQ Bitcoin ETF | 27.176 | 0.502 | 0.666 | 0.464 | 0.294 | 0.475 | 0.750 | 0.637 | 0.647 | 1.000 |
Drilling Down Into Test Results
Finally, we’ve conducted the multi-statistic peer group analysis for the top fund First Trust Indxx Innovative Transaction & Process ETF against all global ETFs selected as a peer group as shown below.
Feel free to reach out to us for a comprehensive risk assessment of exchange-traded funds or ETF portfolios.
Learn More About FlexiRank™
For a deeper understanding of the FlexiRank™ concept and how it facilitates asset comparison, we invite you to join our dedicated webinar Asset Ranking Techniques. Explore a dynamic framework that enhances your ability to compare and rank assets, providing a comprehensive and holistic perspective on risk and return.
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