The debut of the first-ever Dogecoin ( DOGE 1.97%) exchange-traded fund (ETF) was met with significant excitement on Sept. 18. On its opening day, the ETF attracted nearly $17 million in inflows, and even seasoned industry analysts were taken aback by the impressive trading activity in the REX-Osprey DOGE ETF ( DOJE 2.38%).
However, this meme coin ETF might not be exactly what you expect. Here’s what you should understand.
Not all spot ETFs are created equal
The recently launched Dogecoin ETF, trading under the ticker "DOJE," offers investors a way to track Dogecoin’s spot price—though the method it uses could be confusing for many.
Spot Bitcoin ( BTC 1.44%) and spot Ethereum ( ETH -0.06%) ETFs actually purchase the underlying cryptocurrency on the spot market and hold it for investors, ensuring a direct 1-to-1 correlation with the asset’s spot price.
The REX-Osprey DOGE ETF, on the other hand, does not follow this approach. Instead, it relies on financial derivatives to simulate a spot Dogecoin position, executing these trades through a subsidiary based in the Cayman Islands.
Image source: Getty Images.
This means that investors in the ETF do not actually own Dogecoin, either directly or through the fund. Instead, they hold a "synthetic" position designed to reflect Dogecoin’s spot price. As the prospectus makes clear: "Investing in DOJE is not equivalent to investing directly in Dogecoin."
While this setup may closely track Dogecoin’s price in the short term, over longer periods, discrepancies can arise. This was the same issue encountered by earlier Bitcoin ETFs that were based on derivatives before the arrival of genuine spot Bitcoin ETFs in 2024.
Should you consider the new Dogecoin ETF?
This ETF uses an innovative regulatory strategy, making it much simpler to gain approval. That’s why the REX-Osprey DOGE ETF was able to launch ahead of others.
However, if you want true spot exposure to Dogecoin, it may be best to wait for upcoming spot Dogecoin ETFs, which could become available by year’s end.
