Just as Bitcoin and the cryptocurrency markets are once again heating up and hitting new highs, a new ETF opened up, which offers investors another way to play the industry. The Viridi Cleaner Energy Crypto-Mining & Semiconductor ETF (RIGZ) is a very interesting ETF that just launched on July 20th, 2021 and offers investors a sort of backdoor play into the cryptocurrency world, without fully relying on cryptocurrencies increasing in value in order to realize a decent return.
RIGZ offers investors the ability to invest in cryptocurrency and semiconductor firms located in developed countries that focus on clean energy and environmental sustainability. The cryptocurrency firms that RIGZ invests in are crypto-miners.
These crypto-miners also are the ones that have reportedly switched to "cleaner" energy sources than what other miners or miners in the past have been accused of using. As you may know, mining for cryptocurrency is, in most cases, a very energy-demanding operation. The amount of electricity the mining rigs (The main components of any crypto-mining rig are power supply, a motherboard, an operating system to run on your motherboard, computer memory, and a graphics processing unit) need has been estimated by the Bitcoin Energy Consumption Index at one Bitcoin transaction takes 1,544 kWh to complete, or the equivalent of roughly 53 days of power for the average US household.
So, if a miner is using clean energy, that is advantageous to the environment and potentially could even make the company more profitable, especially if the company is producing some of the energy themselves with the use of solar panels or small wind-powered turbines.
Furthermore, RIGZ is invested in the semiconductor companies that make the chips and components used in the mining rigs. These firms also are trying to lower the energy consumption of the chips and components that are being used in the mining rigs. This again is good for the environment and the firms making these components since they will likely be able to charge more for components that use less energy to run since, in the long run, the end client will save money on energy costs if they use components that use less energy.
RIGZ's fund management team self-evaluates each miner and semiconductor company in terms of what they are looking for from both a financial business standpoint, hardware quality, and from a clean energy standpoint. The team looks at all sources of energy and rates each firm based on the energy mix and subcategory of its operations. Approximately 15 to 30 companies will be held in RIGZ, regardless of market capitalization.
RIGZ has an expense ratio of 0.90%, which is high, but considering the work involved with researching and finding the top companies in this industry, not to mention figuring out the clean energy aspect, the fee seems reasonable at this time. The fund is very new, and in a speculative industry, so currently, the assets under management are very low at just $10.17 million. This should be something to keep an eye on if you are interested in investing in the fund. You want to see that number grow monthly and ideally be well above the $100 million mark before its first anniversary.
Below is a list of the 19 companies the fund currently holds and the size each represents in the fund.
Investors considering RIGZ as a long-term investment should also download and save the fund holding information, which can be found here. That way, you can reference this information as the fund matures and changes holdings or just as assets under management increase. This will also give you a better understanding of whether the funds' management team is doing a good job at picking winners or if they are just getting lucky and the whole industry is moving higher, which boosts their returns.
Diligently tracking a fund's performance is a good way to determine if a high expense ratio is worth paying or not and whether or not the fund itself is truly worthwhile investing in.
Regardless, investors should remember that RIGZ is a play on Bitcoin and cryptocurrency. Thus, it carries a little more risk but also rewards than some other ETFs that are available.
Disclosure: This contributor did not own shares of any investment mentioned above at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.