Summary The First Trust SkyBridge Crypto Industry and Digital Economy ETF is an actively managed fund that offers investors exposure to crypto-businesses. Compared to peers, CRPT has outperformed with a 115% total return year-to-date. Most similar funds have returned less than 80% over the same time. The out-performance is likely derived from two main differences; CRPT has a sky-high 215% turnover ratio and a high reliance on Bitcoin ETFs and mining stocks. Despite beating peer 'digital economy' ETFs and having significant exposure to BTC and BTC-proxies, CRPT is still trailing the ProShares Bitcoin ETF year-to-date. With Bitcoin ( BTC-USD ) rallying past $100k per coin and Ethereum ( ETH-USD ) back above $4k, enthusiasm has returned to the digital asset space. With that enthusiasm, comes even more capital. As of December 14th, capital flows into digital asset products have been surging in the month of December, even after already strong flows for the entirety of November: CoinShares So far through just two weeks in December, the market has seen over $2.2 billion in month-to-date ETH flows, $4.6 billion in month-to-date BTC flows, and another $280 million in XRP ( XRP-USD ) flows. This brings total net flows into digital asset products for 2024 up to $44.5 billion. With investors likely thinking about portfolio positioning for 2025, some may find a more 'diversified' approach to digital asset investing to be the desired path. Beyond that, the volatility in digital assets can often be difficult to stomach. For some, investing in companies that benefit from digital asset sales and adoption may be the best option. In this article, we'll explore the First Trust SkyBridge Crypto Industry and Digital Economy ETF ( CRPT ) to determine if it's a good ETF for more traditional investors who might be 'crypto-interested' in 2025. Fund Details & Objective Fund Details CRPT Issuer First Trust Advisors L.P. Inception 09/20/2021 Expense Ratio 0.85% AUM $106.54M Fund Strategy Active Source: Seeking Alpha After coming to market right before the top of the crypto market back in Fall 2021, it has been an interesting journey for CRPT shareholders, to say the least. Data by YCharts Anyone who has been holding shares of the fund since late 2021 has likely been hugely disappointed. After topping in November 2021, inception day, CRPT shareholders have a total return of just 11.5% over the last three years. Of course, those who bought the bottom of 'crypto winter' in December 2022 have been handsomely rewarded with over 500% in just two years. The objective of the fund is straightforward. The fund manager aims to provide shareholders with capital appreciation derived from at least 80% of net assets in common stocks and ADRs of crypto industry economies or Bitcoin exchange-traded assets. Performance Against Peers There are a handful of similar funds that give investors several products to choose from if they want broad exposure to crypto, blockchain, or digital assets as thematic ideas. For the sake of comparison to CRPT, I've chosen four other products that I view to be similar. Each of which has at least $100 million in assets under management but less than $250 million in AUM. So from where I sit, these funds are similar both in size and objective: Schwab Crypto Thematic ETF ( STCE ) VanEck Digital Transformation ETF ( DAPP ) Global X Blockchain ETF ( BKCH ) Fidelity Crypto Industry and Digital Payments ETF ( FDIG ) Of the peer group, CRPT has the largest expense ratio by far at 0.85%. That said, the fund also pays shareholders a 1.5% dividend - matched only by BKCH, which has a similar payout and a lower expense ratio: Comps CRPT STCE DAPP BKCH FDIG Issuer First Trust Advisors L.P. Schwab ETFs VanEck Global X Funds Fidelity Investments Inception 09/20/2021 08/03/2022 04/12/2021 07/12/2021 04/19/2022 Expense Ratio 0.85% 0.30% 0.51% 0.50% 0.40% AUM $106.5m $109.1m $210.2m $216.7m $182.2m Dividend Yield (TTM) 1.50% 0.54% - 1.51% - Number of Holdings 28 42 22 26 40 Turnover 215% 58% 57% 39.8% 53% Source: Seeking Alpha The metric that jumps off the page for CRPT is the 215% turnover ratio. The indication being CRPT is far more actively managed. As we'll see in the next section, it's also highly concentrated on top holdings. So how has that approach to asset management worked out for shareholders? Turns out, the year-to-date return for CRPT shareholders has actually been phenomenal: Data by YCharts At a 115% total return year-to-date, CRPT has vastly outperformed each of the other funds shown, with none of them even eclipsing 80% year-to-date. At least to some degree, the active management and concentration of the fund are a big reason behind the outperformance for CRPT. The holdings themselves also require exploration. Top 10 Holdings Security Name Market Value Weighting Coinbase Global, Inc. ( COIN ) $18,851,895.42 17.43% MicroStrategy Incorporated ( MSTR ) $16,517,215.39 15.27% Galaxy Digital Holdings Ltd. ( BRPHF ) $12,398,337.28 11.46% MARA Holdings, Inc . ( MARA ) $11,813,099.22 10.92% iShares Bitcoin Trust ETF ( IBIT ) $6,095,664.51 5.63% IREN Ltd. ( IREN ) $4,714,631.31 4.36% Cipher Mining Inc. ( CIFR ) $4,687,261.59 4.33% VanEck Bitcoin ETF ( HODL ) $4,441,024.62 4.11% Bitwise Bitcoin ETF ( BITB ) $4,436,709.00 4.10% Fidelity Wise Origin Bitcoin Fund ( FBTC ) $4,439,173.28 4.10% Source: First Trust As of December 13th, there were 32 different holdings in CRPT, including cash. The allocation to the top ten holdings is 82%. The bottom 16 holdings account for roughly 3% of AUM combined, and most of those holdings are well-known companies that have more loose associations with digital assets. For instance, Advanced Micro Devices ( AMD ) and Visa ( V ) each have a 0.09% weighting in CRPT. Bitcoin ETFs account for 22% of fund assets. After 44% combined allocation to Coinbase, Galaxy, and MicroStrategy, the remaining fund assets are generally held in Bitcoin mining stocks like MARA, IREN, CIFR, CleanSpark ( CLSK ), Riot Platforms ( RIOT ), and TeraWulf ( WULF ) - each of which has over 2% allocations. Risks While the fund has performed quite well over the last 12 months and even out-performed similar peers by a wide margin, there are numerous risks in going long a fund like CRPT. First, for a fund that has the words 'digital economy' in its name, there is an enormous reliance on Bitcoin for shareholder returns. Between Bitcoin ETFs, Bitcoin miners, and MicroStrategy, the overwhelming majority of the fund's assets are held in Bitcoin and Bitcoin proxies. Coinbase and Galaxy Digital are perfectly justifiable holdings for a fund like this. But that's about where the allocation logic ends for me personally. Robinhood ( HOOD ) would figure to have top 10 exposure in a digital economy fund, yet HOOD shares make up just 0.1% of CRPT AUM. Bitcoin Hash Price (HashRateIndex) Furthermore, 31% of AUM is allocated to Bitcoin mining stocks. These are companies that are generally facing a dubious long-term investment outlook due to declining BTC issuance from the asset's fixed supply and block reward halvings. As of the article submission, the hash price from mining BTC is about $63 per PHS/Day. To put this into perspective, the hash price was over $100 for most of April before the halving. The point is, even with Bitcoin well above $100k per coin, miners are still earning less than they were in April when Bitcoin was closer to $60k. Closing Summary The First Trust SkyBridge Crypto Industry and Digital Economy ETF is fast-moving. This is a high-risk, high-reward fund that has significant concentration risk to top holdings, a very high turnover ratio, and a high reliance on Bitcoin and Bitcoin proxies. While it is true that CRPT has outperformed similar funds on a year-to-date total return, consider CRPT against the total return of something like the ProShares Bitcoin Strategy ETF ( BITO ): Data by YCharts Year-to-date, the total return of CRPT is trailing that of BITO by about 900 bps. The question I have is why allocate to a fund that is highly reliant on Bitcoin and Bitcoin proxies for a total return that is likely to ultimately lag Bitcoin? In my view, it makes sense to not overthink it during trends like the one we're currently seeing in Bitcoin. There is perhaps a time and a place to go long a fund like CRPT. For instance, when Bitcoin and Bitcoin mining stocks are totally bombed out, like they were at the end of 2022. But that's not the setup we have today.
