A great first week for the new ETF Cleaner Energy Crypto Mining

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The SEC has yet to approve a bitcoin or cryptocurrency ETF, but that hasn’t stopped issuers from trying to get as close as possible to it.

The first blockchain ETFs debuted in 2018 with the launch of two new ones this year, including the Global X Blockchain ETF (BKCH), which hit the market earlier this month.

The Bitwise Crypto Industry Innovators (BITQ) ETF was also launched earlier this year, which targets companies operating directly or indirectly in the crypto ecosystem.

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This week, we got the Viridi Cleaner Energy Crypto-Mining & Semiconductor (RIGZ) ETF, the latest release from the space that not only targets some of the biggest names in crypto and blockchain, but also filters out one of the biggest names in crypto and blockchain. biggest environmental concerns facing the industry today.

Viridi Cleaner Energy Crypto-Mining & Semiconductor ETF (RIGZ)

RIGZ is an actively managed ETF that invests in equity securities of companies that are market participants themselves creating cryptocurrencies. In addition, it will target companies in the semiconductor industry, focusing on those that develop or manufacture computer chips used in the crypto mining industries. RIGZ will not invest directly in cryptocurrencies itself.

In summary, RIGZ will consider companies that

(i) the company has a satisfactory clean energy score (based on its proprietary analysis described below) and (ii) the company derives the majority of its income or profits from, or invests the majority of its assets in, crypto-mining industries.

The top 10 holdings of the fund include a number of well-known names in the industry such as AMD (AMD), Nvidia (NVDA), Riot Blockchain (RIOT), Marathon Digital (MARA) and Bitfarms Limited (BITF) of Canada. .

RIGZ ETF Top 10 Securities

RIGZ’s big differentiator is its ESG orientation. Its investments in miners are selected according to certain clean energy criteria.

Clean energy criteria

According to information from the RIGZ website:

Given the high energy consumption of the crypto mining industry, the main focus of the clean energy sub-advisor will be to reduce the negative environmental impacts of mining and promote environmental sustainability. The sub-advisor assesses and ranks the clean energy profile of each miner. In particular, the sub-advisor takes into account the following information:

* the size of the miner’s operation (in megawatts (MW) of energy)

* the energy mix of the Miner’s operation

* the sub-category of the energy mix (for example, flared natural gas, coal, wind power)

* carbon offsets purchased

* future clean energy commitments (expected to be implemented over the next 12 months) made by Miner’s management team

The sub-advisor uses a proprietary multiplier which generally differs for different types of energy sources (eg flared natural gas, coal, wind). For example, wind power has a much lower multiplier than coal. The sub-advisor calculates the score for each individual company and uses a benchmark score in which companies that are less than or equal to the benchmark are defined by the sub-advisor as clean energy miners, while those which are above the benchmark are defined by the Sub-Advisor as non-clean energy miners. The sub-advisor will also reduce the score for miners who use carbon offsets, which essentially reflects a reduction in greenhouse gas emissions achieved by the miner.

The intense use of energy in crypto mining efforts has become a priority within the industry. Investors have largely started to give negative opinions to companies that take a less environmentally friendly approach. RIGZ is the first ETF to actively screen out some of the biggest offenders.

Great performance of the 1st week

Call it a matter of lucky timing or whatever you like, but RIGZ had one of the biggest first week performances for a new ETF in recent memory. Trading was presumably thin, but an 11% four-day return demonstrates the potential (and risk) that comes with this space.

RIGZ ETF

RIGZ clearly benefited from the strength in blockchain stocks, which rallied sharply after a first massive sell-off on Monday. However, you don’t want to put any real weight on performance over such a short period of time. Cryptocurrencies are obviously very volatile, and stocks adjacent to this industry likely will be too.

Long term, I like the focus on renewables of a crypto miner ETF. This is clearly where the industry is heading and Viridi’s ability to gain the first player advantage on this theme could prove vital to ensuring her longer term success. The fund is quite concentrated, only holding about 20 names and RIGZ’s 0.90% expense ratio won’t necessarily be cheap, but getting exposure through an actively managed fund in a space is expensive. rapidly changing.

RIGZ is Viridi’s first ETF launch.

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