Summary Nicholas Crypto Income ETF stands out as a high-quality, actively managed crypto income fund with a sustainable strategy and weekly distributions. BLOX's methodical holdings, option-writing approach, and diversification offer resilience during crypto downturns, with a current annual yield of approximately 36%. The fund's active management allows dynamic option strategies, reducing NAV erosion and volatility compared to higher-yielding, less flexible peers. I maintain a buy rating on BLOX, citing its tax-efficient distributions, lower NAV erosion, and superior downside protection versus crypto sector alternatives. Overview After assessing the performance of the crypto markets over the last few months, I have come to the conclusion that the Nicholas Crypto Income ETF ( BLOX ) is one of the highest quality crypto-focused income funds out there at this time. When I previously covered BLOX, I issued a buy rating due to the portfolio's ability to benefit from the growth of Bitcoin in the future. Since then, Bitcoin has continued its pullback from its highs, and the fund's share price is down about 7%. Thanks to the distributions, BLOX's total return remains positive since that last coverage. Looking at the performance since inception, we can see that BLOX's share price has fallen by 22.17%. However, I believe that these new lows present an opportunity for accumulators that are optimistic about the outlook of crypto. When including all distributions paid out to shareholders, these declines are mostly offset. One of the main appeals of BLOX is the weekly distributions and the high dividend yield of 36%. Furthermore, I love the fact that the distributions offer some partial tax-efficiency, which can soften the tax burden of the high level of income generated. Data by YCharts Following the reversal of the crypto market, I was able to assess other crypto-focused income funds. When comparing the performance and vulnerabilities of peers, it is clear that BLOX currently stands as one of the most sustainable long-term choices amongst peers. While there are still so many risks to consider, I believe that BLOX can be a rewarding way to generate a high level of income from the crypto sector. So let's start by taking a look at the underlying strategy that makes BLOX stand out amongst peers. Fund Strategy According to the fund's overview , BLOX has total net assets of about $226M. The fund's primary goal is to provide capital appreciation and a high current income, while providing exposure to Bitcoin ( BTC-USD ) and Ethereum ( ETH-USD ) funds. Furthermore, BLOX will directly invest in companies that engage in business throughout the different sub-sectors of the industry, including things like crypto asset mining, blockchain technology, trading platforms, and DeFi providers, just to name a few. What differentiates BLOX from other peers is the way the holdings are structured. Instead of allocating a large portion of its assets to speculative companies like Strategy ( MSTR ), BLOX takes a more methodical approach and holds companies that have more consistent streams of income over long stretches of time. Looking at the top holdings, we can see that BLOX is most heavily allocated to the Fidelity Wise Origin Bitcoin Fund ( FBTC ) at 15.75% of assets. This is followed by other notable holdings such as Taiwan Semiconductor Manufacturing ( TSM ), Nvidia ( NVDA ), and IREN Limited ( IREN ), just to name a few. To get exposure to Bitcoin and Ethereum, BLOX holds positions in the VanEck Bitcoin ETF ( HODL ) and the iShares Ethereum Trust ETF ( ETHA ). BLOX Holdings However, BLOX doesn't actually hold any positions that offer a high enough dividend yield to support the large distributions that are being paid. In order to generate the necessary income, BLOX deploys an option writing strategy that helps capitalize on the volatility of its holdings. Instead of using a traditional covered call strategy, BLOX sells call spreads. This means they initiate a call option while also simultaneously selling another at a higher price. This allows BLOX to capture option premiums, while still seeing some upside growth of its holdings. Another standout feature of BLOX is the fact the fund is actively managed. This means that management can tweak how frequently it writes options based on market conditions. During periods where crypto is rising, BLOX may utilize fewer options so that a greater level of upside growth is captured. Conversely, a greater number of options may be written during periods of choppiness or declines to help offset the unfavorable market conditions. The whole advantage of buying BLOX instead of crypto holdings itself is that investors can capitalize on the uncertainty, while also seeing less volatility over time. BLOX offers a way to get exposure for investors that may not be able to stomach the larger drops that can be experienced throughout the sector. If you are familiar with the crypto markets, you know that large downturns of more than 50% are quite common. BLOX's strategy has the potential to reduce the severity of these sorts of drastic downturns. Bitcoin Decline & Peer Comparison Only a few quarters ago, in October of 2025, BTC peaked slightly above the ~$122K range. Similarly, ETH peaked slightly above the ~$4,800 level in mid-August of 2025. Since then, BTC has declined by about 47%, while ETH has declined by more than 60% from their respective highs. However, BLOX's strategic approach to the sector has allowed the fund to avoid most of these declines. Running a quick performance comparison, we can see that BLOX still suffered from a slight loss, even when including distributions. However, BLOX investors were able to survive this downturn a lot better than traditional crypto holders. Data by YCharts BLOX's approach is unique because many other option ETFs sell options at a set interval, no matter what the market sentiment looks like. Additionally, BLOX offers a favorable level of diversity that helps mitigate the issues of the rapid NAV erosion. When an ETF offers such a large distribution, they are frequently in a scenario where they are paying out more in distributions than they actually earn in income. As a result, this leads to price erosion over time, which can be seen when looking at many of the other popular choices amongst the crypto ETF space, including funds like: YieldMax Crypto Industry & Tech Portfolio Option Income ETF ( LFGY ): ~101% dividend yield. NEOS Bitcoin High Income ETF ( BTCI ): ~46% dividend yield. Roundhill Bitcoin Covered Call Strategy ETF ( YBTC ): ~91% dividend yield YBTC and BTCI are more traditional covered call ETFs that sell upside growth for the premiums that can be collected. As a result, both YBTC and BTCI's upside growth is severely capped, while there are no structures in place to protect against the downside. LFGY is a bit more diverse because it provides exposure to a range of companies that operate within the crypto industry, which means there are some overlapping holdings with BLOX. When running a performance comparison, I believe that BLOX's lower dividend yield and the actively managed structure have resulted in outperformance against these peers. As we can see below, BLOX's total return has held up a lot better through the crypto downturn compared to this peer group. Going forward, I also anticipate that BLOX may outperform as long as the crypto market trades sideways. Data by YCharts Conversely, BLOX may underperform in a scenario where crypto finally turns around. Through a rapid bull market, BLOX may be able to better participate in the upside growth of the market, but the fund will produce lower option premiums since growth isn't entirely reliant on the option strategy. Since the time frame is limited, we can only estimate how BLOX will perform compared to its peers. So I believe that BLOX will experience a greater level of capital appreciation but may underperform peers that have a higher dividend yield. It ultimately comes down to the market conditions, so performance is very dependent and hard to predict. Sentiment Risk Aside from the internal risks related to BLOX itself, the actual crypto sector continues to be one of the highest risk/reward sectors of the market. Crypto can be a sensitive area of the market because it is so new. Bitcoin and Ethereum are still widely misunderstood, and a lot of the market doesn't believe that these assets have any long-term value. Institutional adoption has made a lot of progress over the last few years, but this doesn't necessarily guarantee success. Sentiment is still a big driver of the market, and skepticism for the industry will remain. If the average retail investor doesn't have any tangible use for crypto, all of the actual use cases around the digital infrastructure it can provide get put on the back burner. In the beginning, the approval of spot ETFs was a great catalyst to fuel buying. However, I believe that it's sort of acted like a double-edged sword because it may increase selling pressures during declines. This outflow can reinforce the idea that Bitcoin is simply inefficient as a 'digital gold' equivalent or a store of value. Potential For Tax-Efficient Income As of the latest declared weekly distribution of $0.1065 per share, the current annual yield is estimated to be around 36%. Since distributions are directly impacted by the fund's ability to generate option premiums, the momentum of the crypto market, and the mix of underlying holdings, the actual payout amounts may change over time. Therefore, this may not be the best choice for investors seeking a source of reliable and consistent payouts over a longer period of time. Additionally, the payout history makes it clear that the distribution amounts have declined as the crypto market has pulled back from its highs. As the underlying NAV of the fund declines, BLOX has fewer assets that it can deploy into its option writing strategy, which directly leads to lower option premiums collected. Therefore, the fund has to actively adjust the payouts downward to offset the lower premiums and help protect the NAV of the fund. Seeking Alpha Despite the variable income, BLOX has the ability to produce tax-efficient income by utilizing return of capital distributions. However, tax-efficient doesn't necessarily translate to tax-free, so it is best to consult with a tax professional to see how the distributions may impact you. For instance, the latest Section 19(a) notice indicates that 31.98% of the distributions paid YTD were classified as net investment income, which has the highest tax consequences for investors to consider. However, the other 68.02% of distributions paid YTD were classified as return of capital, which has more favorable tax consequences. Return of capital distributions are not classified as income and therefore are not taxed as such. Instead, this form of distribution reduces an investor's cost basis and allows taxes to be deferred until the time of sale. This allows some flexibility in terms of which account types a position in BLOX may be utilized within. BLOX Section 19(a) Notice Takeaway In conclusion, I believe that BLOX remains a buy at this time. The fund has demonstrated that its strategy can provide better resilience during crypto downturns, while providing a more realistic dividend yield compared to peers. This lower dividend yield may not be as exciting as peers, but it translates to a lower level of NAV erosion over time. The active management style of BLOX means that the frequency of option writing can be tweaked to market conditions. Additionally, BLOX's holdings are a bit more diverse than peers. BLOX also pays out weekly distributions while putting an emphasis on return of capital, which can reduce an investor's tax liability.
