Why was the new BetaShares Crypto Innovators ETF (ASX:CRYP) down 5% on Thursday?

The CRYP ETF seems to have come back to Earth…

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share price plummeting down

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The S&P/ASX 200 Index (ASX: XJO) has finished the day down 0.57% . But one ASX exchange-traded fund (ETF) that investors might not have expected to fall today has done a lot worse. The BetaShares Crypto Innovators ETF (ASX: CRYP) barrelled towards the end of the day. This CRYP ETF finished the day down 4.99%, sitting at a unit price of $11.24.

That might come as a surprise to some investors. Since this ETF floated on the ASX just one week ago today, it had doled out some very impressive gains. In addition, it also managed to break the ASX record for the highest trading volume for a newly-listed fund within its first few hours of life.

As of Tuesday’s close, CRYP units hit a price of $12.38, meaning they were up more than 10% since its ASX debut mere days beforehand. Today’s nasty drop erases much of those gains, and puts CRYP unitholders back at the rough prices this ETF was asking on its first day of trading. Not quite square one, but getting close.

So what has caused this dramatic reversal of fortunes for this new and exciting ETF?

CRYP ETF gets pulled back to earth

Well, to answer that, let’s check out what’s been going on with CRYP’s underlying holdings. Like most ETFs, CRYP holds within it an underlying basket of shares. In this ETF’s case, these shares are selected to give investors “exposure to global companies at the forefront of the dynamic crypto economy”.

So, according to the provider, CRYP’s current top 5 holdings are as follows:

  1. Marathon Digital Holdings Inc
  2. Galaxy Digital Holdings Ltd
  3. Silvergate Capital Corp
  4. Coinbase Global Inc
  5. Microstrategy Incorporated

As it happens, all five of these US-based companies (with the exception of Canada’s Galaxy Digital) had big falls in their valuations overnight (our time) on the US markets. And they weren’t small drops either. Galaxy Digital and Marathon Digital each fell by close to 15%. Silvergate fell by 7.3%, while Microstrategy was down close to 5%. These moves might have been prompted by Coinbase reporting its quarterly earnings, upon which Coinbase shares crashed 8%. 

All this is despite the fact that cryptocurrencies themselves (which the CRYP ETF does not directly invest in) remain at elevated pricing. Indeed, Bitcoin (CRYPTO: BTC) just hit a new all-time high yesterday, although it has fallen by around 6% since then. 

This ETF’s provider BetaShares does warn that “an investment in CRYP should be considered very high risk”. Today proves just why.

Should you invest $1,000 in CRYP right now?

Before you consider CRYP, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and CRYP wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor Sebastian Bowen owns shares of Bitcoin and Coinbase Global, Inc. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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