Summary Nicholas Crypto Income ETF (BLOX) offers high weekly yields and exposure to Bitcoin and Ethereum, appealing after a 20% crypto pullback. BLOX's conservative option-writing strategy and consistent payouts make it less risky than peers like LFGY, especially in volatile or declining crypto markets. The fund's 36% yield, supported by option premiums and return of capital, enables rapid return of initial investment if payouts remain stable. BLOX is a compelling buy for income-focused investors seeking crypto exposure, with best results in tax-advantaged accounts and during favorable crypto conditions. Overview With the rise of high yield ETFs, I've stayed away from any of the crypto related funds since Bitcoin ( BTC-USD ) was hovering near its all-time highs. Now that crypto has pulled back more than 20% from its highs, funds like the Nicholas Crypto Income ETF ( BLOX ) have become a bit more enticing. However, I believe there are a few caveats that investors must consider before initiating a position in this weekly paying ETF. Although I believe that BLOX may present less risk than some alternatives, I still think that BLOX should be considered a high risk/high reward fund. BLOX has an inception dating back to June of 2025, meaning that the fund hasn't been time tested through different market cycles yet. BLOX takes an actively managed approach and gives investors the opportunity to get simultaneous exposure to both Bitcoin and Ethereum ( ETH-USD ), while also placing an emphasis on weekly distributions. BLOX also has a reasonable expense ratio of 1.03%, which is fair considering the high distribution rate of 36% that is being paid out to investors. Nicholas X When compared against one of the most notable peers in the high yield crypto space, I believe that BLOX's more conservative approach to its distribution may be the more suitable choice during a market downturn. The crypto market's momentum seems to be shifting, so the risk of a greater downside movement remains present. Despite the fund's short history, BLOX has done a great job at keeping payouts consistent so far. So let's start by taking a look at the underlying strategy that BLOX implements to generate its earnings. Fund Strategy According to the latest fact sheet , BLOX has total assets under management of $198.7M that is spread across 70 different positions. The fund seeks to generate income primarily using option contracts on some or all of the holdings of the equity and crypto portfolio. Unlike some peers in the sector, BLOX differentiates itself because it actually holds the equities that it writes options against, which reduces the volatility and risk of capital deterioration over time. The fund allocates its assets into a blend of digital assets, as well as companies engaged in the different sub-categories of the crypto industry. This includes segments such as: Crypto Asset Mining Blockchain Technology Crypto Trading Platforms Payment Processing DeFi Technology Providers When looking at the holdings below, we can see that BLOX is heavily allocated to the VanEck Bitcoin ETF ( HODL ) at 14.85% of assets, which directly holds Bitcoin within, as supported by its overview . This is followed by other notable holdings such as Hut 8 Corp ( HUT ), IREN ( IREN ), Robinhood Markets ( HOOD ), and Galaxy Digital ( GLXY ), just to name a few. In short, all of these businesses are exposed to the crypto industry in some capacity. The clear risk comes from the fact that these are companies that are typically more volatile and tied to the momentum of the crypto markets, more specifically, Bitcoin. BLOX Fact Sheet In order to capitalize on this volatility, BLOX writes options against a portion of its holdings, which helps to generate the income needed to support the large dividend yield. BLOX essentially turns this volatility into option premiums, which are used to fuel the distributions that are paid out to shareholders. This means that BLOX can offer massive distributions but it can also come at the cost of capital appreciation. Simply put, BLOX's options will limit the price growth to whatever the selected strike price is. Performance Risk Although the fund's operating history is limited, the volatile market environment has already demonstrated the fund's ability to participate in the momentum of the market and its holdings. As we can see below, BLOX's share price has marginally increased by 0.84% since its inception. However, there was a point where BLOX's share price was approaching a 50% gain only a month ago. So during a crypto bull market, BLOX can be a solid position to partially participate in the positive momentum. When including all distributions paid, the total return jumps up to 10.8% over the same time frame. Data by YCharts However, the returns are a bit skewed at the moment, considering that Bitcoin has experienced a sharp pullback from its highs. As we can see below, BLOX's share price will stay closely tied to the momentum and price movement of BTC, which makes sense considering that all of BLOX's holdings also share a similar price movement to BTC. While the price of BTC did pullback from its highs, the risk remains that the price can always fall further. Data by YCharts While there are other peers that implement a similar option writing strategy against a portfolio of companies with exposure to crypto, I believe that YieldMax Crypto Industry & Tech Portfolio Option Income ETF ( LFGY ) is the most compelling peer. While the underlying holdings and strategy when it comes to its option writing strategy may be different, the underlying premise of trying to turn the sector's volatility into income remains similar. LFGY now offers investors a starting dividend yield of ~70.7% and issues those payouts on a weekly basis. I recently published an article on LFGY that highlights the fund's strategy and risk profile that I'd recommend reading if you are interested in a more dedicated analysis. As we can see below, LFGY shares a similar level of assets under management at $181M, while also having a slightly lower expense ratio of 0.99%. Additionally, LFGY has a slightly longer operating history that dates back to January of 2025. While the two funds share similar fundamentals, I think the key difference comes down to the yield and the use case, based on market conditions. LFGY's large distribution yield is more beneficial during periods where BTC and the overall crypto market is trending upwards. Conversely, LFGY may not be the better choice during pullbacks or flat markets, because the large distributions will have a negative impact on the NAV and capital deterioration. Seeking Alpha I believe that BLOX is the more suitable choice for investors that want a large yield but have a lower risk tolerance for massive share price erosion. BLOX's more conservative yield helps the fund reduce how severe the downside can be in comparison to LFGY. To help demonstrate the differences, I pulled in a performance chart between the two options since BLOX's inception. As we can see below, BLOX's share price has declined by about 8.45% since its inception, compared to LFGY's more drastic decline of 31.67% over the same period. Despite BLOX's having a lower distribution rate, the fund's total return is also higher than LFGY's over the same period. So if the crypto markets will remain choppy in the near-term, BLOX may be the better choice. Data by YCharts Dividends As of the latest declared weekly payout of $0.1529 per share, the current dividend yield sits around 36%. When we're talking about a yield this large, there are a lot of variables that must be considered. For instance, payouts are determined by the success of the written options, momentum of the market/crypto, and the direction of BLOX's underlying holdings. Therefore, the declared distribution is likely to be different week to week. As confirmed by the dividend history below, we can see that payouts vary every week. However, BLOX has done a great job at keeping the payouts within a consistent range, while avoiding any major swings in payouts. I believe that this consistency should be commended because it allows investors to create their own dividend growth by reinvesting portions of their dividends or by adding more capital over time. However, this is only valid assuming that payouts maintain this steady range over the next twelve months. Therefore, the risk remains that the payout amounts can see a large decline if the crypto markets pullback further. Seeking Alpha Since the yield is so large, this enables patient investors to reach 'house money' status when holding for a long period of time. Some quick math tells us that investors can receive their initial investment back within a three year period, assuming that payouts do not experience a large decline. To demonstrate this, we can use a simple example with a $10,000 investment: $10,000 invested at a 36% dividend yield = ~$3,600 in annual income. $10,000 / ~$3,600 annual income = 2.77 years until house money status. Of course, this requires BLOX to keep payouts the same which may not be a realistic expectation in a crypto downturn. I just wanted to use this as an example to demonstrate the power of a large distributions during more favorable market conditions. So if you are bullish on the outlook of crypto, a fund like BLOX can be a great addition to an income portfolio. Once you receive your initial investment back in distributions, your overall risk level is drastically reduced from that point forward. Lastly, the fund tends to utilize return of capital distributions in an effort to reduce the tax impact. For instance, the latest section19(a) notice indicates that 68.6% of the payouts YTD were fueled by return of capital distributions. Return of capital distributions aren't classified as income and therefore, aren't taxed as such. Instead, a return of capital distribution reduces an investor's cost basis and allows taxes to be deferred until the time of sale. However, there will still be some tax consequences to consider since the remaining portion of payouts are fueled by net investment income. Therefore, a position in BLOX may be best utilized within a tax-advantaged account. BLOX Section19(a) Notice Takeaway In conclusion, I believe that BLOX is a compelling buy for investors that want to harness the volatility of the crypto markets. Now that Bitcoin has pulled back more than 20% from its all-time high, it may be a good time to begin accumulating BLOX. The fund's portfolio of holdings may have risks associated with the volatility of crypto, but the lower yield and consistent payouts makes BLOX a better choice than LFGY. The fund has displayed consistent payouts since its inception so far, while also demonstrating that the share price can participate in some price growth in a scenario where crypto eventually heads higher.
