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Cryptocurrency made a big splash when it was approved for trading in exchange-traded funds (ETFs) in 2024. Now, investors looking to buy cryptocurrency through mutual funds have a few ways to do so, following the launch of ProShares’ mutual funds for Bitcoin and Ethereum.
ProShares’ mutual fund affiliate ProFunds launched the Ether ProFund (ETHFX) in late February, following the debut of the Bitcoin ProFund (BTCFX) in mid-2021. Both funds aim to track the price performance of their underlying cryptocurrencies, and they’re the first mutual funds to track these cryptos. But investors need to understand exactly what they’re buying with these funds.
How do these mutual funds differ from other crypto ETFs?
The fact these funds are the first to track these cryptocurrencies makes them interesting. But
both of these mutual funds invest in cryptocurrencies through futures contracts, a kind of financial derivative that can deliver higher (or lower) returns than the crypto coins themselves.
These ProFunds mutual funds differ from existing crypto ETFs in key ways.
- Holdings: These ProFund mutual funds own futures contracts, while spot Bitcoin ETFs own actual bitcoins and spot Ethereum ETFs own actual ether coins. This difference affects both the costs of the funds and their potential returns.
- Costs: The Bitcoin and Ethereum mutual funds have net expense ratios of 1.16 percent and 1.46, respectively, though the Ethereum fund has waived its fees through February 2026. In contrast, the best Bitcoin ETFs charge fees that range from 0.20 percent to 0.25 percent. The best Ethereum ETFs charge fees of 0.19 percent to 0.25 percent.
- Returns: Because of the difference in their holdings, the returns between these mutual funds and spot crypto funds will differ. Spot ETFs will track the performance of the underlying crypto coins very closely, since they own the actual asset. In contrast, the mutual funds may not track the price performance of the crypto coins closely, veering higher or lower over time, depending on the performance of the futures contracts.
- Availability: The mutual funds may not be available at every broker, though you can always buy them directly through the company. In contrast, ETFs trade on a stock exchange, so any of the best brokers for ETFs should allow you to purchase them.
- When you can trade: Mutual funds are priced and trade only after-hours, so you don’t know the exact price you’ll get when you decide to trade. In contrast, ETFs trade throughout the day, so you’ll know exactly the price you’re getting when you buy or sell.
Those are some of the most important differences between the ProFunds’ mutual funds and the spot cryptocurrency ETFs that were launched in 2024. However, some of these differences are simply due to the legal differences between ETFs and mutual funds.
What to watch out for with crypto mutual funds
Investors should pay particular attention to the following issues with these crypto mutual funds.
- May not track the crypto’s price: If you’re looking to get the exact return of the underlying cryptocurrency – many traders are – then these mutual funds may not be the way to go. Because they use futures, the performance is likely to deviate significantly from the coin’s performance.
- Fees: These mutual funds charge relatively large expense ratios, making them less attractive than the relatively low-cost ETFs in this space.
- Risks of cryptocurrency: Beyond just the structural differences, cryptocurrency is highly risky. It’s not only volatile, but it’s not based on the assets or cash flow of an underlying business, meaning that its value is based entirely on what the next trader will pay for it. If demand dries up or sentiment changes, the crypto could be worthless.
Those are the most important things to know about the advent of these Bitcoin and Ethereum mutual funds.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
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