As was recently reported, bitcoin’s correlation to stocks is as high it’s been since 2022. With that in mind, it’s worth remembering that there are equities that are credible “crypto stocks” that offer investors entries to crypto without direct ownership of digital assets.
For those who don’t want to stock pick in this still-emerging space, a growing number of exchange traded funds focus on crypto stocks. That space includes the Grayscale Future of Finance ETF (GFOF). GFOF debuted last month and tracks the Bloomberg Grayscale Future of Finance Index.
The rookie ETF from Grayscale — the issuer behind the vaunted Grayscale Bitcoin Trust (GBTC) — features exposure to some well-known stocks and some that are garnering more attention as of late, including Silvergate Capital (SI), which is angling to become a crypto bank.
“Currently, every analyst polled by FactSet has a Buy rating on shares of Silvergate, whose plans include its own stablecoin and a cryptocurrency payments platform,” reports Daren Fonda for Barron’s. “On Monday, Bank of America analyst Brandon Berman joined the ranks of bullish analysts, initiating coverage on Silvergate stock (ticker: SI) with a Buy rating. His price target of $200 implies gains of 34% from Silvergate’s recent prices around $148.”
Silvergate is relevant in the GFOF conversation because the fund allocates 10% of its weight to that stock, making it the fund’s largest holding. Additionally, GFOF is one just 60 ETFs holding shares of Silvergate, and only one other ETF has a larger allocation to the name than the Grayscale fund, according to ETF Research Center data.
Silvergate offers an impressive growth story. “Silvergate’s payments platform has more than doubled its client base since launching in 2018. Nearly 1,400 clients, including exchanges, family offices, and crypto companies, are now on the network. And dollar-based volume on the network has been rising steadily, hitting $790 billon last year in total,” according to Barron’s.
Bank of America’s Berman estimates that Silvergate can grow earnings at a compound annual growth rate (CAGR) of 60% over the next three years, well in excess of other banks that are considered growth stocks.
As for GFOF, its other well-known holdings include Block (NYSE:SQ), Coinbase (NASDAQ:COIN), Robinhood Markets (NASDAQ:HOOD), and PayPal (NASDAQ:PYPL). The fund’s annual expense ratio is 0.70% per year, or $70 on a $10,000 stake.
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