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The SEC has yet to approve a bitcoin or cryptocurrency ETF, but that hasn’t stopped issuers from trying to get as close to one as possible.
The first blockchain ETFs debuted back in 2018 with two new ones launching this year, including the Global X Blockchain ETF (BKCH), which went to market earlier this month.
Also launching earlier this year was the Bitwise Crypto Industry Innovators ETF (BITQ), which targets companies either directly or indirectly operate in the crypto ecosystem.
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This week, we got the Viridi Cleaner Energy Crypto-Mining & Semiconductor ETF (RIGZ), the latest take on the space that not only targets some of the biggest crypto and blockchain names, but also filters for one of the biggest environmental concerns facing the industry today.
Viridi Cleaner Energy Crypto-Mining & Semiconductor ETF (RIGZ)
RIGZ is an actively-managed ETF that invests in equity securities of companies that are market participants creating cryptocurrency themselves. In addition, it will targets companies in the semiconductor industries, focusing on those that develop or manufacture computer chips used in crypto-mining industries. RIGZ will not itself invest directly in cryptocurrencies.
In summary, RIGZ will consider companies that
- (i) the company has a passing clean energy score (based on its proprietary analysis described below) and
- (ii) the company derives a majority of its revenue or profits from, or invests a majority of its assets in, the crypto-mining industries.
The fund’s top 10 holdings include a number of well-known industry names, such as AMD (AMD), Nvidia (NVDA), Riot Blockchain (RIOT), Marathon Digital (MARA) and Bitfarms Limited (BITF) from Canada.
RIGZ ETF Top 10 Holdings
The big differentiator for RIGZ is its ESG focus. Its investments in miners are screened according to certain clean energy criteria.
Clean Energy Criteria
According to information from the RIGZ site:
Given the high energy usage of the crypto mining industry, the Sub-Adviser’s primary clean energy focus will be reducing negative environmental impacts of mining and promoting environmental sustainability. The Sub-Adviser evaluates and ranks each Miner’s clean energy profile. In particular, the Sub-Adviser considers the following information:
* the size of the Miner’s operation (in megawatts (MW) of energy)
* the energy mix of the Miner’s operation
* the subcategory of energy mix (e.g., flared natural gas, coal, wind)
* purchased carbon offsets
* future expected clean energy commitments (expected to be implemented within the next 12-month period) made by Miner’s management team
The Sub-Adviser uses a proprietary multiplier that generally differs for different types of energy sources (e.g., flared natural gas, coal, wind). For example, wind power has a much lower multiplier than does coal. The Sub-Adviser calculates the score for each individual company and utilizes a benchmark score in which companies that are lower or equal to the benchmark are defined by the Sub-Adviser as clean energy miners, while those that are above the benchmark are defined by the Sub-Adviser as non-clean energy miners. The Sub-Adviser will also decrease the score of Miners that use carbon offsets, which essentially reflect a reduction in greenhouse gas emissions made by the Miner.
The intense energy usage in crypto mining efforts has become a big focus within the industry. Investors have largely begun giving a negative view to companies who take a more environmentally unfriendly approach. RIGZ is the first ETF that will actively screen some of the biggest offenders out.
Big 1st Week Performance
Call it a matter of lucky timing or whatever you want, but RIGZ had one of the biggest first week performances for a new ETF in recent memory. Trading was expectedly thin, but a 11% four-day return demonstrates the potential (and risk) that comes with this space.
RIGZ ETF
RIGZ clearly benefited from strength in blockchain stocks, which recovered strongly after an initial Monday sell-off. You don’t, however, want to put any real weight into the performance over such a short time frame. Cryptocurrencies are very volatile, obviously, and the stocks adjacent to this industry will likely be as well.
Long-term, I like the renewable energy focus of a crypto miner ETF. This is clearly where the industry is headed and Viridi’s ability to get the first mover advantage on this theme could prove vital in ensuring its longer-term success. The fund is quite concentrated, holding only about two dozen names and the 0.90% expense ratio of RIGZ won’t necessarily be cheap, but it’s cost for obtaining exposure through an actively-managed fund in a rapidly evolving space.
RIGZ is Viridi’s first ETF launch.
Note: Interested in getting periodic e-mail notifications when articles are published here? Drop your e-mail in the box below!
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