Summary Nicholas Crypto Income ETF (BLOX) offers a 36% distribution yield, appealing to income-focused investors seeking crypto exposure despite ongoing volatility. BLOX employs a synthetic call strategy for crypto exposure, blending covered calls with growth equities and using put spreads to mitigate drawdowns. Recent NAV and distribution declines reflect crypto market weakness, but BLOX’s drawdown since inception is less severe than peers, aided by active management. Expense ratio has dropped to 0.99%, enhancing relative attractiveness among actively managed crypto income ETFs with weekly distributions. Introduction While I'll admit I remain somewhat skeptical of crypto assets like Bitcoin ( BTC-USD ), their rapid adoption make it difficult to ignore. I recently added crypto exposure to my portfolio by adding the iShares Bitcoin Trust ETF ( IBIT ), but have been watching the Nicholas Crypto Income ETF ( BLOX ) for a while now as well. With the crypto winter ongoing, it's getting harder and harder to ignore BLOX's 36% distribution yield. If you follow me, then it's likely you know I recently started a new portfolio, focused entirely on generating income. While I do expect further volatility for BLOX and other crypto-related assets, I remain bullish on crypto due to worldwide acceptance and view the sell-off as macro driven liquidation. As a result, I believe BTC-USD will recover at some point and have contemplated adding BLOX to my portfolio. In the meantime, income-focused investors can collect a 36% weekly distribution yield while they wait for the recovery. Previous Buy Thesis It's been a little over 3 months since I last covered BLOX , assigning them a buy rating. Their unique strategy and weekly distributions were attractive for long-term investors bullish on crypto. Moreover, their outperformance vs the YieldMax Crypto Industry & Tech Option Income ETF ( LFGY ) made them attractive despite their short track record. Since, BLOX has underperformed, down over 21% in comparison to the S&P ( SP500 ), down close to 3%. Seeking Alpha Strategy What makes BLOX different from other crypto-focused ETFs is the fund's unique strategy of capital appreciation first, income second approach. How the fund does this is by blending a synthetic call strategy to get exposure to crypto. This means that they don't actually own crypto, but sells options. In its portfolio, BLOX holds other ETFs like the Fidelity Bitwise Origin Bitcoin Fund ETF ( FBTC ), iShares Ethereum Trust ETF ( ETHA ), & VanEck Bitcoin ETF ( HODL ), all top 10 holdings. BLOX Additionally, BLOX holds companies that generate real earnings growth. You can see tech behemoth NVIDIA ( NVDA ), Taiwan Semiconductor Manufacturing Company ( TSM ), and RIOT Platforms ( RIOT ) are also included in the top 10 holdings. In my opinion, this makes BLOX more appealing for long-term investors looking for both growth and income. However, like other covered call ETFs, their strategy comes with risks. The main one is the possibility to see high volatility, common for crypto. Investors looking to invest in BLOX should be aware of this. You can see from the chart below Bitcoin and BLOX have seen a lot of volatility in the last year. Both are down double-digits compared to the S&P, up over 20%. Seeking Alpha In recent months, volatility has increased further with both BTC-USD & BLOX down approximately 38%. Since October, Bitcoin has pulled back from its high of $126k and has bounced between $60k - $70k. At the time of writing, BTC-USD stands at roughly $71k. Seeking Alpha But in the past 5 days, crypto has made a modest recovery. Both Bitcoin and BLOX are in the green with the ETF leading the way, up roughly 7.5%. Seeking Alpha To minimize drawdowns, BLOX uses a put options spread strategy, meaning they sell puts at the same time, but at different strike prices to limit risk during periods of heightened volatility. This also allows them to maintain larger distributions and protect the fund from higher amounts of NAV erosion. But investors should be aware that selling put options does not protect them entirely from experiencing NAV erosion. You can see below that BLOX has seen negative NAV growth in the past 1, 3, and 6 months due to the pullback in crypto assets. YTD, this has slowed somewhat with their NAV down a little over 9%. BLOX This has changed from my last article that saw NAV growth of 16.95% and 25.48% over a 1 and 3 month period. As a result, BLOX's distributions have seen a slight decline as well, also a risk when covered call funds experience negative NAV growth. Back in October of 2025 when Bitcoin was around its high, BLOX's distributions averaged approximately $0.18 a share. Year-to-date these have declined to around $0.12. While any decline in income is a disappointment, the modest drop is not overly concerning. Seeking Alpha Because BLOX is actively-managed and focused on crypto, these funds typically have higher expense ratios. Since my last thesis, the ETF has actually lowered their expense ratio from 1.03% to 0.99%. BLOX This is similar to YieldMax's Bitcoin Option Income Strategy ETF's ( YBIT ), slightly higher than NEOS Bitcoin High Income ETF's ( BTCI ) 0.98%, and lower than LFGY's 1.02%. For actively-managed funds with exposure to crypto, I view those with expense ratios below 1% as particularly attractive. Distribution Taxes Speaking of distributions, BLOX's are a combination of return of capital and net investment income. While most investors are likely familiar with the tax treatment of ROC, net investment income is taxed differently. BLOX 19-a ROC distributions are tax favorable because taxes are deferred until the time of sale, or your cost basis reaches zero. Below is an example of how net investment income taxes are impacted depending on your modified annual gross income. Charles Schwab If your income goes over the threshold depending on your filing status, this subjects you to a 3.8% tax on the portion that goes over. Below is an example: Charles Schwab This is essential for investors to understand before buying covered call funds. So, depending on your tax bracket, BLOX may be better suited held in a tax-advantaged account. How BLOX Is Likely To Behave Most covered call funds do well in sideways markets. As already evidenced earlier in the article, BLOX is likely to underperform in crypto bear markets. And if the crypto winter continues and causes Bitcoin to make new lows, BLOX's NAV and distributions will likely decline. In a sideways market, the fund is likely to see solid total returns because of its high distribution yield and ability to generate solid option premiums. If and when crypto goes on a bull run, BLOX will likely underperform Bitcoin itself, but see decent total returns because of its yield and exposure to growth companies in the crypto industry. To note, BLOX does have a relatively short track record with an inception date of June 16, 2025. On a positive note, they have experienced less of a drawdown than peers since going public, down 24.25%. This is likely due to their peers higher distribution rates with the exception of BTCI who distribution yield sits at 28.05%. Also, BTCI's strategy is different with less exposure to growth names like NVDA, COIN, and TSM. Instead, they seek synthetic exposure through crypto futures , HODL, IBIT, and t-bills. Seeking Alpha So, despite the crypto volatility and overall market uncertainty, the ETF has done better despite the shorter track record. Seeking Alpha Investor Takeaway If you're bullish on crypto long-term, then the Nicholas Crypto Income ETF may be a good fit if you're primarily focused on income. Despite their short track record, the fund has managed to see less of a drawdown since its inception compared to peers. Moreover, they are actively-managed and their weekly distributions help blunt some of the blow from the crypto pullback. While BLOX remains a risky bet due to high amounts of volatility in their portfolio holdings, their 36% distribution yield and capital appreciation first approach make them a viable option for income-focused investors looking for crypto exposure and portfolio diversification.
