Forget Bitcoin: Buy This Ethereum ETF Instead

Bitcoin has had a resurgence this year. The price of a single token in Canadian dollars has shot up 145% over the past 12 months. Investors who accumulated the world’s most famous cryptocurrency in 2018 and 2019 are now sitting on multibagger gains. 

While plenty of experts believe the price of Bitcoin could rise much higher, I believe investors should tame their expectations. Instead, a lesser-known cryptocurrency is now easily available and worth a closer look. Here’s what you need to know. 

Bitcoin’s potential

Hedge fund billionaires such as Stanley Druckenmiller and Paul Tudor Jones II have bet on Bitcoin this year. Their investment thesis hinges on Bitcoin’s viability as a store of value. In other words, these finance wizards consider Bitcoin a form of digital gold. 

That means we have a clear indication of Bitcoin’s market potential. The total value of all the gold that has ever been mined is roughly US$7.5 trillion, according to an estimate by the World Gold Council. Meanwhile, the collective value of all 21 million Bitcoin (including unmined) currently stands at US$350 billion. 

In other words, Bitcoin could rise 20-fold if it replaces gold completely. While that’s a long shot, it’s not beyond the realm of possibility. However, a smaller cryptocurrency would have much more room to grow. 

Ethereum’s potential

Unlike Bitcoin, Ethereum serves as the backbone of decentralized applications. This means experts consider it “digital oil” rather than “digital gold.” As we know, oil is more useful and more valuable than a shiny yellow metal. 

It’s difficult to quantify the total market size for digital services and decentralized applications. But considering the fact that there are multiple trillion-dollar enterprises selling online shopping software, enterprise software and consumer mobile applications, I’d guess the market potential for Ethereum is orders of magnitude greater than Bitcoin’s. 

Meanwhile, Ethereum’s market capitalization is just US$40.6 billion — much smaller than Bitcoin. 

How to bet on Ethereum

Fortunately, Canadian investors don’t have to buy Bitcoin or Ether directly. Now there’s an exchange traded fund (ETF) that offers easy exposure. ETFs are like stocks that track the performance of an underlying asset. In the case of the Ether Fund (TSX:QETH), that underlying asset is Ether. 

The fund is managed by investment giant 3iQ. Meanwhile, the Ether is held in custody by Gemini, the company owned by the Winklevoss twins. Since the fund was backed by such well-established entities it was swiftly approved by Canadian regulators. The ETF started trading on the Toronto Stock Exchange last week. 

3iQ also manages the popular Bitcoin Fund (TSX: QBTC.U), so this is a company with some pedigree.

At the moment, you can buy the ETF for $10.80 per share. That means you could add exposure to the world’s second largest cryptocurrency for just $10. 

Bottom line

Bitcoin has had an incredible run and could still have plenty of potential for growth. But since this industry is risky, I prefer a bet with higher potential returns. The newly listed Ether Fund ETF is worth a closer look if you’re intrigued by this nascent sector.