Is an ETF combining Bitcoin and Ethereum worth considering? A recent analysis has meticulously outlined an equally weighted portfolio of the two largest cryptocurrencies in the market, aiming to better grasp their value proposition for investors.
In a significant move for the cryptocurrency market, the U.S. Securities and Exchange Commission (SEC) has granted approval for an Exchange-Traded Fund (ETF) focusing on Bitcoin and Ethereum. Previously, the regulator had acknowledged the filing of 19b-4 for the Hashdex Nasdaq Crypto Index US ETF. If approved by the SEC, expected by March 2025, the ETF will include both Bitcoin and Ethereum, the top two cryptocurrencies, in its portfolio.
The question of whether an ETF combining Bitcoin and Ethereum is worthwhile was explored in an analysis shared by the Kaiko platform on July 5. Based on a portfolio equally balanced between BTC and ETH during the highs of 2021 and this year’s peak performances, the analysis revealed potential returns of 58% in 2024.
“Analyzing an equally weighted portfolio of Bitcoin and Ethereum during the 2021 highs and this year’s peak in January, we found it would have yielded a 58% return in 2024, compared to 20.6% in 2021,” highlighted the study.
The analysis underscored that traditional investors may find the ETF product appealing not only due to potential returns but also because of the improved risk profile of a BTC/ETH portfolio.
“Using a 99% confidence interval for VaR, one of the most conservative levels used in traditional finance, we can observe the daily profit and loss realized during the first-quarter bull run. The BTC/ETH portfolio maintains a manageable risk level and a balance of gains and losses. Assuming a 99% VaR of $10,000, statistically, we would expect $10,000 in losses one day out of every 100, as seen below.”
The analysts clarified that VaR is a risk indicator that assigns a dollar value to potential portfolio losses and their probability.
Disclaimer: The opinions expressed in this article are for informational purposes only and do not constitute financial, investment, or other advice. Investing or trading in cryptocurrencies carries a risk of financial loss.
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