Summary The Bitwise Crypto Industry Innovators ETF delivered a 90%+ total return since the last review, largely due to mining stock exposure. BITQ's top ten holdings now have an even greater allocation to mining stocks, despite a shift in the top three holdings toward crypto innovation names. The fund's performance has been driven more by AI/HPC hype than pure crypto innovation, raising questions about the sustainability of recent gains. I maintain a hold on BITQ, as miner concentration persists and several notable crypto ecosystem stocks remain absent from the portfolio. It has been nearly two years since I last covered the Bitwise Crypto Industry Innovators ETF ( BITQ ) for Seeking Alpha. Back then, I initiated coverage of the fund with a 'hold' call and primarily cited what I viewed as a Bitcoin ( BTC-USD ) miner concentration problem for the fund: I like the idea of a broad crypto innovation ETF that focuses primarily on companies rather than the network assets themselves, but I think BITQ is a bit too reliant on Bitcoin mining stocks than would be otherwise expected. Since that piece was published, BITQ has a total return of over 90%. This has been a terrific return for the fund, and ironically shareholders have benefited from the very thing that I felt was bad for the fund back in May 2024; namely, BITQ has performed well because of the Bitcoin mining stocks in the fund. We can see in the chart below that BITQ has performed far better than a company like Coinbase ( COIN ), which I view as a crypto pure play: Data by YCharts I'm also showing these performances relative to the CoinShares Bitcoin Mining ETF ( WGMI ) as well as MARA Holdings ( MARA ). The reason I'm showing this is because I think it makes the case that BITQ has likely benefited more from 'AI' hype than from its crypto or mining as economically viable ideas. Mining stocks prioritizing AI/HPC have had abnormally large weightings in WGMI, and I've covered that concept for SA in the past. Furthermore, MARA was late to the HPC/AI pivot party, and that stock has been a massive laggard among mining peers. The point is, I don't think my theory was terribly off-base, but it hasn't mattered. In any case, the fund has performed well over the last 20 months, and I think that warrants a reassessment. Fund Details and Strategy AUM: $393 million Holdings: 34 Expense Ratio: 0.85% Inception: 5/11/21 Notably, the ETF doesn't invest directly in coins or tokens and instead aims to offer investment to the public companies that benefit from the digital asset ecosystem. Per Bitwise: BITQ provides focused exposure to the crypto economy without the complications of holding crypto assets directly. According to Bitwise's summary prospectus , the fund still has the same investment strategy that it did two years ago. The ETF breaks its investment into two tiers of companies. Tier 1 companies generate at least 75% of their revenue from cryptocurrencies or have more than 75% of their net assets in either Bitcoin or Ethereum ( ETH-USD ). Based on this classification, companies like Coinbase or Strategy ( MSTR ) would be considered Tier 1, and each of them is in the ETF. Tier 2 companies are companies with at least a $10 billion market capitalization that have clear initiatives involving digital asset mining, trading, custody, development, or transaction validation. This tier would include companies like Robinhood ( HOOD ) or PayPal Holdings ( PYPL ), and again, each of them is in the fund. Holdings Update Back in May 2024, BITQ had a 35% allocation to its top three holdings and a 28.5% allocation to mining stocks from its top ten holdings alone. Things have changed slightly since then. Though two of the top three positions remain the same: BITQ 5/23/24 1/7/25 Top Holding MicroStrategy Circle Internet Group ( CRCL ) Second Holding Coinbase Coinbase Third Holding Marathon Digital Strategy Top 3 Weight 34.7% 28.3% Miner % of Top 3 8.1% 0.0% Miner % of Top 10 28.5% 32.4% Source: Seeking Alpha, Bitwise Circle Internet Group, which hadn't yet gone public when I last covered BITQ, is now the largest holding in the fund at 9.7% as of January 7th, 2025. Coinbase still comes in at the two spot, and Strategy has fallen from number one to number three. Even though there isn't any mining company in the top three holdings, the percentage of mining stocks in the top ten is actually larger today than it was in May 2024. After the top three, the rest of the top ten is filled out by mining stocks: Rank BITQ Top Ten Holdings Market Value Weight 1 Circle Internet Group $37,957,809 9.69% 2 Coinbase Global $36,768,256 9.38% 3 Strategy $36,460,622 9.31% 4 Hut 8 ( HUT ) $22,993,191 5.87% 5 IREN Ltd. ( IREN ) $19,674,177 5.02% 6 Riot Platforms ( RIOT ) $18,548,010 4.73% 7 Core Scientific ( CORZ ) $17,224,420 4.40% 8 Applied Digital ( APLD ) $17,182,252 4.39% 9 TeraWulf ( WULF ) $15,631,584 3.99% 10 MARA Holdings $15,558,923 3.97% Source: Bitwise, 1/7/26 APLD, CORZ, WULF, and IREN have all benefited massively from HPC/AI expectations over the last 24 months. If the AI trade starts to unwind in 2026, these names could theoretically take BITQ back down to earth. But that's admittedly pure speculation on my part. As far as the broader investment objective goes for BITQ, I think many of the remaining companies in the fund align considerably better with a 'crypto innovator' investment strategy. BITQ holds Galaxy Digital ( GLXY ), Figure ( FIGR ), PayPal, Robinhood, Bullish ( BLSH ), and eToro Group ( ETOR ). While readers shouldn't take this as an endorsement for investment in any of these names, I'm a bit surprised that BITQ doesn't have any allocation to several crypto ecosystem names in the public equity markets that figure to qualify as Tier 1 companies. Those names include but are not limited to the following: Exodus Movement ( EXOD ) Fold Holdings ( FLD ) BitMine Immersion ( BMNR ) Exodus operates a permissionless crypto wallet, Fold is building a Bitcoin rewards system, and BitMine is the largest Ethereum DAT in the market. Furthermore, a name like Block Inc . ( XYZ ) is also missing from the fund despite certainly qualifying as a Tier 2 idea. This might be a nit-picky critique, but I would think investors who want exposure to crypto innovations would rather see stocks like EXOD or FLD than a stock like APLD. Closing Summary I didn't like BITQ two years ago because of its mining stock allocations. That didn't matter. As fate would have it, by having a significant allocation to mining stocks, BITQ benefited from the AI/HPC hype of 2024 and 2025. The fund outperformed crypto pure plays like Coinbase. While I could sit here and try to argue BITQ holders have benefited more from luck than from a crypto innovation investment strategy actually working, that would likely come off as sour grapes. Regardless, BITQ is where it is, and the top three holdings are slightly more tailored to crypto 'innovation' companies than they were two years ago. Still, the miner concentration is evident. The top ten holdings of the fund have a larger allocation to mining stocks today than was the case two years ago. I'm still going to pass on BITQ.
