Are you thinking about investing in blockchain and Bitcoin, but want to diversify your blockchain investment?
Consider purchasing Blockchain ETFs as apart of your investment.
While bitcoin is notorious for its extreme volatility, even bitcoin’s harshest critics recognize the extraordinary potential of the blockchain.
How does blockchain ETFs differ from other type of ETFs?
Blockchain ETFs are funds that meet at least one of the following two criteria:
- They are funds that invest in companies involved with the transformation of business applications though development and use of blockchain technology.
- They are funds that track the performance of Bitcoin or other cryptocurrencies through futures contracts or by holding the underlying crypto-assets.
In this article, we’ll cover some of the most promising ETFs in the blockchain space.
1. Amplify Transformational Data Sharing ETF (BLOK)
Launched: Jan. 16, 2018
Expense ratio: 0.70%
AUM: $162 million
BLOK is a global-in scope portfolio of companies, but what’s unique about BLOK is that it’s the only actively managed blockchain ETF. The decision to go active centres on the issuer’s belief that blockchain is still an emerging technology, and one that’s changing too quickly to be best accessed through an index that reconstitutes twice a year.
The fund seeks companies that match one of three criteria:
- Those that are leading in collecting revenue from blockchain;
- Those that are leading in research efforts.
- Those that are leading investment in private companies in this segment.
2. First Trust Indxx Innovative Transaction & Process ETF (LEGR)
Expense ratio: 0.65% per year
The First Trust Indxx Innovative Transaction & Process ETF (NASDAQ:LEGR) is the newest member of the blockchain ETF fray, having come to market on Jan. 25.
LEGR tracks the Indxx Blockchain Index. This new blockchain ETF splits member firms into three groups: active enablers, active users and active explorers. Active enablers are defined as companies that are actively engaged in the development of blockchain technologies while active users are those companies that actively using the technology. Active explorers are those companies that have publicly disclosed plans to possibly use the blockchain.
“A growing number of industries and institutions are looking to embed blockchain technology into their day-to-day processes,” said First Trust. “Blockchain allows customers and suppliers to connect directly, without the need for a central entity, like a bank or financial institution, to make a transaction.”
LEGR only holds companies with market values of at least $500 million and 20-day and three-month average daily volume of at least $3 million.
3. Reality Shares Nasdaq NextGen Economy ETF (BLCN)
Expense ratio: 0.68% per year
Like the aforementioned BLOK, the Reality Shares Nasdaq NextGen Economy ETF (NASDAQ:BLCN) cannot have blockchain in its name, but this is a blockchain ETF. BLCN is a passively managed ETF tracking the Reality Shares Nasdaq Blockchain Economy Index.
“BLCN uses the Blockchain Score company rating methodology, which is designed to identify the companies that may benefit most from blockchain technology,” according to Reality Shares.
BLCN holds 59 stocks from the technology, financial services, healthcare and industrial sectors. None of BLCN’s holdings command weights above 2.43%. Top 10 holdings in this new ETF include Intel, IBM and Microsoft Corporation (NASDAQ:MSFT).
BLCN is also rapidly attracting a following as highlighted by its ability to gather $85.8 million in assets after coming to market on Jan. 17.
4. Innovation Shares NextGen Protocol ETF (KOIN)
Expense Ratio: 0.65%
If you have a little bit of that gambling spirit — and if you’re reading a blockchain ETFs to buy article, you probably do! — check out Innovation Shares NextGen Protocol ETF (NYSEARCA:KOIN).
On surface level, KOIN doesn’t sound particularly risky. Virtually all of its holdings are in large-cap companies, two-thirds of which are headquartered in the U.S.
But it’s the top holdings that makes KOIN an exciting play. Curiously, credit-card company Visa Inc (NYSE:V) is in pole position with a 7.31% weighting. Visa has made unfortunate headlines earlier this year, with CEO Alfred Kelly dismissing the crypto sector’s validity. So why on earth would KOIN lean so heavily toward Visa?
Although it’s speculation on my part, I believe the fund architects view the blockchain as an unignorable innovation. With more people increasingly utilizing cryptocurrencies, Visa and its ilk can’t play “too cool for school.” Apparently, American Express Company (NYSE:AXP) saw the writing on the wall. AXP initiated a partnership using the Ripple blockchain to replace the aging (and inappropriately titled) Swift transaction system.
The KOIN gamble? That Visa and Mastercard Inc (NYSE:MA) will get off their high horse and join the party!
Granted, it is a risky play considering how stodgy Visa is. But if you’re observing macro trends, you have to love the KOIN ETF!
5. Evovle ETFs
This actively managed ETF provides exposure to a diversified portfolio of companies, both domestic and global, that are involved in the blockchain industry.
The investment objective of Evovle is to maximize total return by actively investing primarily in equity securities of issuers whose principal business is the research, development, use or supply of blockchain technologies and applications, including technology hardware.
Who should consider investing in Evovle ETFs?
Investors who are:
- Seeking exposure to an actively managed portfolio which consists primarily of equity securities of issuers involved in the blockchain sector
- Willing to accept a high degree of risk
- Do not need a steady source of income from their investment
Toronto Stock Exchange (TSX)
March 6, 2018
REGISTERED INVESTMENT ELIGIBILITY
MANAGEMENT EXPENSE RATIO (MER)
As the blockchain technology grows and becomes more mainstream, we should be seeing more and more ETFs adding blockchain as apart of their investment.
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