With the U.S. Presidential Election just around the corner, the Fidelity Crypto Industry and Digital Payments ETF (FDIG) appears to be well-positioned to potentially benefit from the results.
I’m bullish on FDIG and its portfolio of crypto-related stocks, which could enjoy significant tailwinds in the event of a Trump victory. While the fund is not particularly diversified, it offers plenty of exposure to the digital asset space, which could thrive in a Trump administration. FDIG also features a lower expense ratio than many of its peers. Additionally, sell-side analysts foresee potential upside of over 30% over the next 12 months, making FDIG a compelling investment opportunity.
What Is the FDIG ETF’s Strategy?
Launched by Fidelity in 2022, FDIG is a relatively small ETF with $104.6 million in assets under management (AUM). According to fund sponsor Fidelity, FDIG’s objective is to “provide investment returns that correspond, before fees and expenses, generally to the performance of the Fidelity Crypto Industry and Digital Payments Index.”
The fund will typically invest at least 80% of its assets in this index. The index is composed of “companies engaged in activities related to cryptocurrency, related blockchain technology, and digital payments processing.”
Trump’s Win Could Propel Crypto Stocks
Prediction market platform Polymarket now assigns a strong 64% probability that former President Donald Trump will win the U.S. Presidential Election in November. This strong probability bodes well for FDIG and other crypto-related stocks that it owns, as Trump has consistently and vocally supported Bitcoin (BTC-USD), cryptocurrency, and the crypto industry on the campaign trail. Trump has spoken at major crypto industry events and has met with top industry executives.
First and foremost, Trump’s Presidency would likely be good for Bitcoin. The former President has spoken about establishing a ‘strategic Bitcoin reserve’ to stockpile Bitcoin in a manner similar to the strategic petroleum reserve as a matter of national interest. Trump’s Presidency would also bode well for Bitcoin miners, as he says that he wants all remaining Bitcoin to be mined in the United States. A heavy 30% tax on Bitcoin miners proposed by the Biden administration would also be off the table.
Also, other players within the crypto industry would likely prosper from a friendlier and clearer regulatory framework as a result of a Trump presidency. Trump would seek a more collaborative approach with the industry and says he would form an advisory council of industry leaders. Trump has said, “The moment I am sworn in, the persecution stops and the weaponization against your industry ends.” Trump has also said he wants to ensure that the United States becomes the “crypto capital of the world.”
This more collaborative approach and clearer regulatory framework would behoove crypto companies like Coinbase (COIN), which have tussled with regulators over the past four years.
What if Trump Loses?
If Trump loses, this trade would certainly lose some steam, but all hope wouldn’t be lost.
While the Biden administration has been fairly hostile to the crypto industry, it seems that Democratic nominee Kamala Harris may be pivoting to be more accepting of crypto based on its popularity with younger voters. In an election projected to be fairly close, both candidates need all of the votes they can get, and Harris likely doesn’t want to alienate any would-be voters based on her party’s perceived stance towards crypto, even if it’s just a small constituent of voters.
While most within the crypto industry appear to have rallied around Trump, outliers like Ripple co-founder Chris Larsen have supported Harris — the billionaire has donated $11.8 million to the Harris campaign. Others, like Uniswap CEO Hayden Adams, are optimistic that Harris will be more open to crypto innovation than Biden, although it should be noted that his comments were met with skepticism by many others within the industry.
Ultimately, a Trump win in November would certainly generate more momentum for FDIG than a Harris win, but in the event Harris does win, FDIG could hold up better than expected.
FDIG’s Portfolio
FDIG holds 39 stocks, and its top 10 holdings account for 57.9% of the fund’s assets. You can take a look at an overview of FDIG’s top 10 holdings below using TipRanks’ holdings tool.
As you can see, FDIG’s top holding is Coinbase, with an 11.6% weighting, and the rest of its top holdings are Bitcoin miners like Marathon Digital (MARA) and Riot Platforms (RIOT).
While this may not make for a particularly diversified portfolio, it does make for one that should benefit in the years to come in the event of a Trump win in November, as discussed above.
FDIG’s Expense Ratio
FDIG charges an expense ratio of 0.39%, meaning that an investor allocating $10,000 into the fund would pay $39 in fees on an annual basis.
While this expense ratio may not be as low as those of broad-market index funds, it is actually more affordable than many of FDIG’s crypto-related ETF peers. For instance, the Van Eck Digital Transformation ETF (DAPP) and the Global X Blockchain ETF (BKCH) both charge 0.50% and 0.51%, respectively. Meanwhile, the iShares Blockchain and Tech ETF (IBLC) has an expense ratio of 0.47%, and the First Trust Indxx Innovative Transaction & Process ETF (LEGR) charges 0.65%. The Bitwise Crypto Industry Innovators ETF (BITQ) charges an even higher 0.85%.
You can check out an overview of FDIG versus these competitors below using TipRanks’ ETF Comparison Tool, which allows investors to compare and contrast various ETFs based on a wide variety of customizable factors.
Is FDIG Stock a Buy, According to Analysts?
Turning to Wall Street, FDIG earns a Strong Buy consensus rating based on 33 Buys, seven Holds, and zero Sell ratings assigned in the past three months. The average FDIG stock price target of $41.87 implies 37.3% upside potential from current levels.
Tailwinds Ahead for FDIG and Crypto Stocks
I’m bullish on FDIG and the crypto stocks in its portfolio heading into the election. Prediction platform, Polymarket, appears increasingly confident that Trump will win the election, which should be a major tailwind for FDIG and the entire crypto industry. Bitcoin would likely get a boost from Trump’s plans to establish a strategic Bitcoin reserve, miners would perform well based on the removal of the overhang of potential punitive taxes, and industry players like Coinbase and others would likely benefit from Trump’s more collaborative approach and laissez-faire attitude towards regulations.
A Trump loss certainly wouldn’t be ideal for FDIG, but it could hold up better than many are expecting. A new Harris administration would likely need to be more conciliatory towards the crypto industry than the Biden administration because Harris must make inroads with crypto voters in what is slated to be a close election.
