(Bloomberg) -- It’s a very happy new year in one corner of crypto land.

Digital asset-focused funds are dominating the $6.8 trillion ETF market so far in 2023, accounting for the top 14 performers among equity ETFs — excluding leveraged products — out of about 2,000 tracked by Bloomberg.

While it’s early days, it’s a dramatic contrast to last year, when cryptocurrency-linked funds were among the worst performers as digital assets tumbled and a number of the industry’s best-known projects infamously collapsed. Bitcoin last year lost more than 60% in value in what turned out to be its second-worst annual stretch on record. 

The Valkyrie Bitcoin Miners ETF (ticker WGMI) has surged 67% year to date, and the VanEck Digital Assets Mining ETF (DAM) has jumped roughly 56%, data compiled by Bloomberg show. Double-digit rallies in the VanEck Digital Transformation ETF (DAPP), the Global X Blockchain ETF (BKCH) and the Bitwise Crypto Industry Innovators ETF (BITQ) help round out the list of the five best-performing exchange-traded funds this year. 

Such funds were among 2022’s biggest losers. The Viridi Bitcoin Miners ETF, which traded under RIGZ before shuttering, lost 87% for the year, while DAPP and BITQ each shed nearly the same amount. Positive economic indicators at the start of this year, however, have driven a reversal in trend, with traders hopeful appetite for risk might soon return. The S&P 500 has gained 3.6% so far this year.

“There is a bit of a reversion to the mean happening to start the year — the worst-performing equity ETFs of 2022 are starting on the strongest foot in 2023, most notably crypto-linked ETFs,” said Athanasios Psarofagis at Bloomberg Intelligence. “Investors who tax loss harvested in 2022 might be looking to get back in now.”

Bitcoin is starting the year off on a banner note, advancing roughly 17% since the end of December — even as the space continues to be beset by scandals and implosions. The coin now trades above $19,000 once again, though it’s still far off its near-$69,000 highs notched in November 2021. 

The bad-news flow has been relentless, with US regulators announcing on Thursday that they are suing Genesis Global Capital and Gemini Trust Co. for breaking securities rules. The Securities and Exchange Commission said the firms illegally raised billions of dollars from hundreds of thousands of investors through a high-yielding product that let customers loan out assets in exchange for interest payments. 

Meanwhile, crypto companies are still tightening their belts, with some of the biggest firms collectively shedding thousands of jobs in the first weeks of the year, a Bloomberg analysis showed. Further upheavals could come as crypto brokerage Genesis and its parent firm Digital Currency Group seek to resolve their debt woes with Gemini and other creditors. 

One of the top holding in the $2.4 million WGMI — whose ticker is a crypto-lingo acronym for “we’re gonna to make it” and which is usually bandied around by fans during better times — is Bitfarms Ltd., a miner that has soared 161% this year even as it’s warned that one of its subsidiaries may default on a loan with bankrupt BlockFi Inc. Other Bitcoin miners have also skyrocketed as they reduce loans and scale back their operations. 

WGMI’s rally is “directly correlated to the performance of crypto,” said Mohit Bajaj, director of ETFs at WallachBeth Capital. “Bitcoin has had a nice run, and those that are miners of it will get a boost from crypto’s performance.” 

But good times in crypto are known to come and go, with the bad stretches sometimes persisting for a long time. Coins skyrocket when money is easy and get killed when things turn, says David Donabedian, chief investment officer of CIBC Private Wealth US.

“For something that has been absolutely clobbered and where you know there’s a significant component of speculative investors, they’re taking that and running with it,” he said of the recent rally. “But I go back to: it’s a speculative investment, and you better know what you’re doing — and you better be willing to be as quick a seller as you are a buyer.” 

--With assistance from David Pan.

©2023 Bloomberg L.P.