What ETFs to look at for exposure to the cryptocurrency space

Dave Nadig, CIO and Director of Research for ETF Trends, joins Yahoo Finance to discuss market outlook, tech stocks, and cryptocurrency.

Video Transcript

KRISTIN MYERS: But let's continue this conversation on the markets. We're joined now by Dave Nadig, the chief investment officer and director of research for ETF Trends. Dave, always great having you here with us. So let's start with cryptocurrencies. It was what Jared started off with, talking about the bloodbath, which has gotten a little bit less bloody throughout today's session. Now for those that want to get into the space, even tangentially, via a blockchain ETF, for example, is today the day that they should really be jumping in? Or as you're looking at some of this volatility, is this really a huge warning sign for you in this space?

DAVE NADIG: The volatility isn't that surprising. I think to anybody who's watched it, I mean, there are memes out all over Twitter already, talking about 2017 is showing up to teach people how it's done in 2021. We've seen these kinds of volatile spikes before. Crypto in general is extremely narrative dependent. So when we get a hiccup like this news from China or even just the occasional comment from a social media star, it really is going to move individual currencies.

I think the approach of looking at some of the equities associated with the space may make it a little bit more comfortable for investors. I'm a fan of BITQ. It's the new Bitwise product. There's another one called DAPP, D-A-P-P, from Van Eck. Both of those products invest in the companies underneath this crypto revolution. And sure, they're going to get hit, too. Something like Coinbase is obviously going to have a bad day on a day when Bitcoin is down 30% to intraday. But I think long-term investors should expect these companies to maneuver well in the crypto space. And then when you roll those up inside a nice ETF package like BITQ, I think it makes sense.

ALEXIS CHRISTOFOROUS: What about folks who don't want to take the all in plunge and invest in a cryptocurrency itself, but want some exposure to the space? Are there blockchain ETFs or other things that they could be looking at to get a little exposure?

DAVE NADIG: Yeah, so the two that I mentioned, BITQ and DAPP, I think they're the most recent ones. They're really focused on what we call DeFi or decentralized finance, where, you know, that's a part of the industry I'm most interested in. It probably has the least to do with the value of Bitcoin on a day-to-day basis. So I think that's an interesting angle. BLOK is another ETF tracking this space. If you look across those funds, you're going to see a lot of the same holdings. It is still a pretty nascent industry. There aren't hundreds and hundreds of publicly traded companies that you can really get access to here.

KRISTIN MYERS: All right, let's look at the market a little bit more broadly. Some of the losses we've been seeing today, for example, in crypto, we saw them claw back some of those losses. Same as well with tech. And this is something that we've repeatedly been chatting about, that rotation in and out and in and out of some of those growth names of the tech sector.

Kind of a similar question here for you that we had on crypto-- I'm curious to know, going ahead, looking at everything that is going to be happening in the next half of the year, do you think investors should be climbing into some of those tech names, looking at perhaps some of those tech ETFs, those tech heavy ETFs, as a way to mitigate against some of those risks, especially as we hear a lot of folks saying that value, cyclicals, that is where you want to be?

DAVE NADIG: Well, we spend most of our time at ETF Trends talking to financial advisors. And they tend to lead the market. We can follow their interest and see what they're researching and then what they're buying. And they were showing us, frankly, throughout March and April that they were derisking their equity portfolios. They were at the front end of unloading some of these tech names. And I point out those tech names are the things at the top of SPY and QQQ as well.

Instead, what we saw was an allocation into slightly safer or more income oriented names. Something as simple as, like, the Invesco Equal Weight S&P RSP has the salutary quality of deleveraging from those huge names at the top of the cap sheet and investing in some of the rest of the economy that isn't in those FAANG names. So I think we've seen that. We've also seen a lot of focus on dividend payers as advisors really struggle to create income streams for their customers.

So we've seen some interest in fixed income in unusual places. And we've seen a lot of interest in things like NOBL, which is the Dividend Achievers ETF from ProShares, really helping bring that income feature to an equity allocation while you're simultaneously derisking. Whether or not today's the day to jump in to a tech fund, I think that's generally a mug's game, trying to call bottoms. But if you've been on the sidelines, averaging in is never a bad strategy.

ALEXIS CHRISTOFOROUS: OK, so those dividend paying stocks very popular right now, fixed income. What about in the commodities space? Are you seeing some interest there? Because we know those are traditionally risk-on assets, and they're getting hurt today. But have you been seeing an appetite for commodities ETFs?

DAVE NADIG: Yeah, we've seen-- the way we measure it is sort of advisor engagement. We've seen about a doubling of interest over the last year. It shouldn't be super surprising, right? Commodities are one of the most storied ways of dealing with the pending inflation that we've been talking about off and on for the last six months. Now, there are some caveats there. I'm not a big believer in gold here. I'm not really a big believer in gold, period, as a commodities play.

But something like PDBC, which is a broad-based commodities play, that's seen a lot of interest. A bunch of money has flowed into that. And it's giving you broad exposure to a whole range of commodities, not just precious metals, not just oil. That's really been a positive strategy. I would expect to see continued interest there.

We've also seen a lot of interest in companies that are in that business, so, so-called natural resources companies. The sort of name above the title ETF there would be GUNR, G-U-N-R, which is the Flex Shares Natural Resources ETF. Just a ton of engagement, a lot of flows, and so far, investors have been pretty well rewarded.

KRISTIN MYERS: All right, Dave Nadig from ETF Trends, thanks so much for joining us today.