Red Flags about CRPT
The First Trust SkyBridge Crypto Industry and Digital Economy ETF (NYSEARCA:CRPT) has seen a substantial gain of 196.1% over the past year. However, the ETF is currently facing two red flags: its extreme exposure to volatile stocks and its high expense ratio.
Strategy Overview
CRPT aims to provide exposure to companies driving cryptocurrency, crypto assets, and digital economies related innovation. It was launched in September 2021 and has $51.7 million in assets under management.
Concentrated Holdings
CRPT invests in various aspects of the crypto landscape including exchanges like Coinbase, miners like Marathon Digital, semiconductor stocks like Nvidia, and big tech giants like Meta Platforms and Alphabet. However, its top 10 holdings make up 91.5% of assets, making it a highly concentrated ETF.
Concerns with Top Holdings
The top two holdings, Coinbase and Microstrategy, account for 44.7% of the fund, which is a significant portion. While these stocks have performed well, they are highly volatile and their performance is closely tied to Bitcoin prices.
Expense Ratio
CRPT has a high expense ratio of 0.85%, significantly above the average for all ETFs. This could result in substantial fees over time, impacting investors' portfolios.
Performance and Risks
Although CRPT has performed well in the current market, it experienced a substantial decline of 80.8% in 2022 during a crypto downturn. Investors need to be aware of the volatile nature of the fund's holdings.
Other Investment Options
Investors have alternative options for exposure to the crypto space with lower-cost ETFs offering better diversification and lower concentration. Consider exploring options like the Fidelity Crypto Industry and Digital Payments ETF (NASDAQ:FDIG) for a more balanced approach.