BNY Mellon’s ETF Regrets: Missing Out on Bitcoin’s Roller Coaster Ride

BNY Mellon’s ETF Dilemma

In the wild world of finance, every decision counts, and BNY Mellon recently learned this the hard way. Their Opportunistic Small Cap Fund (DSCVX) saw a respectable gain of 35% from September 1, 2020, to February 28, 2021, but alas, it couldn’t keep up with the Russell 2000 Index, which soared to a whopping 41.7%. Talk about a case of FOMO!

The Bitcoin Effect

What’s the source of this underperformance? The financial giant pointed the finger at missing out on investments in Bitcoin-exposed companies like MicroStrategy (MSTR). Apparently, deciding not to hitch their wagon to MSTR, which invested billions into Bitcoin, was a real head-scratcher. BNY Mellon lamented, “Fund performance was hurt as well by a decision not to own MicroStrategy, whose stock surged when it announced it had invested in Bitcoin.” That’s one way to rewrite the investment playbook!

Performance Analysis

To add a cherry on top of this financial sundae, Alamos Gold, a gold mining company held in the fund, didn’t do BNY Mellon any favors. Weak gold prices dampened the outlook for those shares. Meanwhile, other ETFs, like the Amplify Transformational Data Sharing ETF (BLOK), pocketed the benefits from investing in Bitcoin champions such as MSTR with a hefty 5.20% of their portfolios allocated to it.

Bitcoin Bonanza for MicroStrategy

MicroStrategy has been on its own Bitcoin roller coaster, accumulating $2.2 billion worth of BTC since August 2020. Its investments have appreciated by an impressive 120%, while MSTR’s stock skyrocketed 385%, reaching peaks around $1,270. Looks like someone’s having a pretty good time in the crypto playground!

Shifting Allocations in BNY Mellon’s Fund

BNY Mellon’s small-cap ETF typically dives into stocks of companies with low market capitalizations from the Russell 2000 Index. With heavyweights like North American airline SkyWest and enterprise cloud provider Cloudera in the mix, the breakdown goes: 23% industrials, 17.5% healthcare, 15.9% technology, and 14.2% financial services. However, one must wonder if this diversification is enough in today’s crypto-centric market.

Future Crypto Moves

Despite the regret over MSTR exposure, BNY Mellon isn’t throwing in the towel. They’ve taken a significant step by leading a $133 million Series C funding round for Fireblocks, an institutional crypto custodian. They’ve also announced plans to offer Bitcoin custody services, signaling a shift towards embracing the crypto revolution. It seems BNY Mellon is ready to change its tune — at least for the future!