Summary FDIG offers low expenses and diversified crypto equity exposure but lacks the asymmetric upside seen in top-performing peers like BLOK or pure Bitcoin. The ETF's holdings are highly correlated with Bitcoin, benefiting from bull markets but also exposed to sharp drawdowns if sentiment reverses. FDIG's construction prioritizes lower volatility, which limits participation in strong rallies and results in inferior risk-adjusted returns versus competitors. I rate FDIG a hold. For higher growth potential, investors should consider BLOK or direct Bitcoin exposure, as FDIG's strategy is only optimal in a flat market. The Fidelity Crypto Industry and Digital Payments ETF ( FDIG ) is focused on companies in the cryptocurrency and blockchain technology industries. This fund recently caught my attention due to it having one of the lowest expense ratios in my constructed peer universe, but it ultimately failed to live up to my expectations for asymmetric upside. I rate this ETF a hold and will dissect why investors should avoid it in favor of some of its more attractive alternatives. Overview Despite being thematically linked to the crypto industry, FDIG tracks equities only. However, some of its largest holdings, such as Coinbase ( COIN ) and Riot Platforms ( RIOT ), exhibit a strong positive correlation to the movement of Bitcoin. FDIG holds a mix of both pure crypto plays in the form of miners and exchanges, as well as enablers in the form of payment and fintech businesses with strong Bitcoin exposure. These companies comprise the Fidelity Crypto Industry and Digital Payments Index , which is rules-based and passively managed. In order for equities to be selected into the index, companies must have a market cap of over $100 million and have a $2 million daily trading volume. Chinese stocks are not included in the index. Additionally, companies must have more than 50% of their revenues generated from the crypto industry, be it in the form of mining, custody, blockchain infrastructure, or digital payments. Stocks are weighted in the index by their modified average daily trading volume ((ADV)). This means that companies are prioritized for their liquidity rather than market cap. As is common with a thematic ETF, its holdings are fairly concentrated, with its top 10 holdings accounting for 69.32% of its total portfolio. The fund has an expense ratio of 0.40% as well as a dividend yield of 0.97%. Seeking Alpha Outlook FDIG looks attractive at first glance. The fund has a P/E of 24.74. This is contrasted with substantial EPS growth forecasts for its top six holdings, with an average expected jump in EPS of 32.03% and a median increase of 28.84%. Thus, from the perspective of price/earnings-to-growth, its attractively priced relative to its forward growth potential. Company EPS Growth Forecast (2025 vs. 2024) COIN (Coinbase) 49.93% MARA (Marathon) N/A RIOT (Riot Platforms) N/A CLSK (CleanSpark) 20.49% XYZ (Block) 34.48% HOOD (Robinhood) 23.22 Average 32.03% Median 28.84% The common denominator that drives earnings for FDIG's holdings is Bitcoin's price discovery. During bull markets such as today, traders spend more on fees, mining is more profitable, and more users are attracted to the utility of digital payments. FDIG has a positive correlation to Bitcoin's price, so what Bitcoin does next can be reasonably assumed to be a leading indicator for the fund's performance moving forward. Data by YCharts Bitcoin is cyclical and is presently in a strong bull run. Analysts estimate that we're between 640 and 975 days into the upwards cycle. Based on historical patterns before a correction arrives, bull cycles have lasted around 1,000 to 1,200 days. The consensus from analysts suggests that we're currently mid-to-late in Bitcoin's current bull cycle, which suggests that Bitcoin could peak sometime between October this year and mid-2026 at the latest. This suggests that we are not yet at the peak, and that there is real upside still left to be gained while Bitcoin remains structurally strong. There may be a lack of a strong, obvious catalyst on the horizon for Bitcoin (such as an upcoming halving event, next due in 2028), but there are still some clear and powerful structural elements that I believe will sustain its upward trajectory. Trump and Vance's White House administration are explicitly backing Bitcoin through proposed reserve allocations as well as through the GENIUS Act and market structure bills. Then there's also the continued dedollarisation in countries like China, Russia, and Iran, which helped to ignite gold's historic rally over the past year, driven by central bank purchases. As tensions rise between the U.S. and its rivals, I foresee that U.S. treasuries will continue to be sold in favor of alternative assets, which opens the door for Bitcoin to be more heavily considered. These are the two main reasons, in my view, that Bitcoin will maintain structural support. Comparative Analysis FDIG is not the strongest performer when examined in a universe with its peers. However, it has the lowest expense ratio at 0.40%, a mid-range one-year return, and a lower volatility than its peers, which have more mining exposure. ETF Expense Ratio (%) 1Y Return (%) 1M Return (%) 3M Return (%) 6M Return (%) YTD Return (%) FDIG 0.4 31.09 15.98 47.01 7.4 21.08 BITQ 0.85 53.61 14.65 51.31 7.42 26.05 WGMI 0.75 23.13 36.34 82.42 1.3 19.69 BKCH 0.5 20.03 26.95 60.09 -0.05 20.31 DAPP 0.51 50.49 17.99 71.99 8.48 27.35 BLOK 0.73 68 12.48 51.26 23.43 40.89 Over the past five years, FDIG returned 64.95%, while BLOK returned 167.83%. Additionally, BLOK's drawdowns were not substantially worse over the past five years, and it managed to seriously outperform FDIG on rallies, leading to its outperformance. FDIG then is an ETF to compare against, but in my peer universe of thematically similar ETFs, BLOK is the clear winner unless one wants to go with pure Bitcoin exposure and not touch equities at all. Bitcoin has gained 906.97% over the past five years. FDIG's performance is therefore underwhelming. Its construction using modified average daily trading volume ((ADV)) aims to reduce volatility, but in doing so, it also limits the fund's performance to participate in strong rallies. Over the past five years, FDIG has returned less on a risk-adjusted basis relative to BLOK (a Sharpe ratio of 1.45 for FDIG vs 2.56 for BLOK), thus making its fund construction self-defeating in this single yet crucial dimension. It's self-defeating because investors can get similar exposure to BLOK with far more historical upside and better risk-adjusted returns. Seeking Alpha Risks Although we may be in the heat of a bull cycle, Bitcoin has historically topped out and corrected hard when bulls lose enthusiasm. It's entirely possible that Bitcoin will peak later this year rather than mid-2026, which could lead to a rapid drawdown. The same correlation to Bitcoin that gives these ETFs their explosive potential can also act as a strong liability during risk-off scenarios. The second main risk is that although FDIG's P/E of 24.74 seems attractive when compared with the projected EPS growth of its top holdings, this growth is largely speculative and driven largely by the assumption that a bull market will continue for the foreseeable future. A drawdown could compress these multiples sharply, and then suddenly the fund seems far less attractive on a forward basis. Takeaway FDIG is a decent performer, but when compared with the price and risk-adjusted returns of BLOK or holding pure Bitcoin (such as through IBIT), it fails to live up to my expectations of asymmetric upside. FDIG is a hold if investors believe that the crypto market will drift sideways due to its expense ratio. But if one thinks there's still upside left, then BLOK or holding pure Bitcoin are better growth-oriented options. The market would need to grow very slowly in order or stay range-bound for FDIG's present strategy to be superior to its peers, and that seems unlikely given how fast crypto companies are expected to grow in the next year alone.
