With the rise of blockchain technology, investors are now given a new and exciting way to explore alternative investments. One popular avenue is through blockchain-based ETFs that expose investors to the potential benefits of this cutting-edge technology. Whether you're an experienced investor or just starting out, understanding the inner workings of blockchain-based ETFs can be beneficial to your financial strategy.
A blockchain exchange-traded fund (ETF) is a type of investment fund that allows you to invest in a group of companies that are involved in blockchain technology. It's like buying a basket of stocks related to blockchain, so you can invest in the growth of blockchain technology without having to buy each stock individually. ETFs are traded on stock exchanges, making them easy to buy and sell like individual stocks.
Blockchain ETFs have popularized because of their potential to add diversity to a portfolio of investments. By purchasing a basket of stocks associated with blockchain technology, investors can diversify their risk across multiple corporations instead of only focusing on a single company's performance. This diversification will help to mitigate the effects of blockchain's volatility and provide a more consistent investment option for those interested in partaking in the growth of the blockchain sector.
Several significant blockchain-based ETFs are marketed, which offer investors a variety of options to consider.
BLOK is the most popular blockchain-based ETF in existence. It aims to maximize total return by investing in companies that utilize or develop transformational data sharing technologies, primarily concentrating on blockchain technology.
Top holdings: MicroStrategy Inc, Coinbase Global, SBI Holdings, PayPal Holdings, Galaxy Digital Holdings.
* Fund Details (as of January 16th, 2024):
- Issuer: Amplify Investments;
- Inception Date: January, 16th, 2018;
- Net Assets: $1,090,516,866;
- Shares Outstanding: 40,450,000;
- Number of holdings: 52;
- Expense Ratio: 0.75%.
BLCN is one of the first ETFs dedicated to blockchain technology. The fund is committed to tracking the evolution of blockchain-related companies across all sectors.
Top holdings: Galaxy Digital Holdings Ltd, MicroStrategy Inc, Coinbase Global, Marathon Digital Holdings Inc, Accenture Plc.
* Fund Details (as of January 11th, 2024):
- Issuer: SRN Advisors;
- Inception: January, 17th, 2018;
- Net Assets: $69,479,924;
- Shares Outstanding: 3,025,000;
- Number of holdings: 58;
- Expense Ratio: 0.68%.
LEGR tracks an index of global stocks selected based on their involvement in the development or use of blockchain technology.
Top holdings: AT&T, Advanced Micro Devices, Intel Corporation, NVIDIA Corporation, Microsoft Corporation.
* Fund Details (as of January 16th, 2024):
- Issuer: First Trust;
- Inception: January, 24th, 2018;
- Net Assets: $104,200M;
- Shares Outstanding: 2,550,002;
- Number of holdings: 102.
- Expense Ratio: 0.65%.
BITQ is managed passively in order to follow a modified market-cap-weighted index of global companies that support a cryptocurrency-based decentralized economy.
Top holdings: Coinbase Global, MicroStrategy Inc, Marathon Digital Holdings, Applied Digital Corporation, Galaxy Digital Holdings.
* Fund Details (as of January 16th, 2024):
- Issuer: Exchange Traded Concepts;
- Inception: May, 11th, 2021;
- Net Assets: $113,601,833;
- Shares Outstanding: 12,450,000;
- Number of holdings: 29;
- Expense Ratio: 0.85%.
BKCH focuses on companies that participate in blockchain-related activities, such as digital asset mining and integration.
Top holdings: Coinbase Global, Marathon Digital Holdings, Riot Platforms, Hut 8 Mining, Applied Digital Corporation, TeraWulf Inc.
* Fund Details (as of January 16th, 2024):
- Issuer: Exchange Traded Concepts;
- Inception: July, 12th, 2021;
- Net Assets: $109.56M;
- Shares Outstanding: 3,125,860;
- Number of holdings: 25;
- Expense Ratio: 0.50%.
Investing in blockchain-ETFs benefits both newbies and experienced investors.
Blockchains ETFs facilitate a diversified portfolio of companies that specialize in blockchain technology, this can mitigate the risk associated with the investment.
The investment in blockchain ETFs provides a means of becoming familiar with the innovative and possibly disruptive nature of blockchain. Instead of dealing with the complexities of purchasing and storing cryptocurrencies, investors can simply purchase shares in a blockchain ETF through their financial institution.
Because of the rapid growth and widespread adoption of blockchain technology in various industries, investments in blockchain ETFs can lead to significant growth. As blockchain technology continues to affect various industries, such as finance, logistics, and healthcare, companies that are leading this technology will have a significant increase in potential revenue. By purchasing a blockchain ETF, investors can take part in the potential growth.
While blockchain-based ETFs are beneficial, it's important to consider the associated risks before committing funds.
One significant danger is the inherent instability of the blockchain market. The value of blockchain-related assets can be highly variable, depending on factors like the sentiment of the market, regulatory actions, and technological advances. Investors should be cognizant of the potential for price fluctuations when investing in blockchain-based ETFs.
Alterations to the blockchain industry can have an effect on the performance of companies involved in a blockchain ETF. As technology's evolution continues, companies may need to alter and innovate in order to remain relevant, which will lead to uncertainty in their future.
The regulatory environment surrounding blockchain and cryptocurrencies is still evolving, and alterations to regulations could have an effect on the operations and potential growth of companies within a blockchain-based ETF.
For those interested in adding blockchain-based ETFs to their portfolio, several basic steps are available to them.
Step 1. Conduct an extensive research (with the help of such resources like Investopedia, VettaFi, etf.com etc) to understand the different types of blockchain ETFs that are available in the market.
Investors should consider factors like the expense ratio, holdings, performance history, and investment goals when evaluating potential ETFs.
Step 2. Once an appropriate blockchain-based ETF has been found, investors can make a decision based on their tolerance of risk and the goals they have in mind regarding investment.
This may necessitate the consultation of a financial advisor or additional research to make sure the chosen ETF is in line with the overall investment strategy.
Step 3. After choosing a blockchain ETF, investors can now utilize their brokerage account to execute their investment. It's crucial to watch the performance of the selected ETF over time and make changes as necessary to maintain concord with your investment goals.
It is crucial for investors to have a dependable digital wallet to safeguard and manage digital assets with confidence.
Nonbank offers a digital non-custodial wallet solution that allows investors to safely keep their cryptocurrencies and have a full control over their assets. This can be of particular importance especially to investors who also participate in crypto-related ETFs, as they can easily connect any digital wallet to Nonbank and diversify their investment portfolio with the help of Spaces.
As the future development of the Nonbank app is going to include the multiple-asset support, the platform can be considered as the best option for investors, who can choose not only the most used cryptocurrencies, but the less popular as well.
The Nonbank digital solution also supports the extensive security features (2FA, Face/Touch ID, AML checks and many more), which provide peace of mind for investors who are managing their cryptocurrency investments.
As a result, investors can simplify their crypto-related financial concerns and have access to their digital assets in conjunction with traditional investments, this will lead to a comprehensive approach to portfolio management.
ETFs have evolved significantly since the first product associated with the performance of large U.S. stocks was released in 1993. Over the past two and a half decades, it appears that global investors have recognized the value of ETFs.
Future views of blockchain-ETFs seem to be promising because of the increasing prevalence of blockchain technology in various industries. The potential for blockchain-based growth and innovation is exciting for investors who want to know more about this technology. As companies utilize blockchain's power to facilitate efficiency and innovation and since the ETFs market is expected to reach $14 trillion by the end of 2024, the companies in blockchain-ETFs may derive benefit from these enhancements.
Understanding the significance of blockchain ETFs in increasing the diversity of a portfolio is crucial in the contemporary financial environment. By being exposed to the potential growth and innovation of blockchain technology through ETFs, investors can take advantage of the opportunities of this revolutionary industry.
As you consider the potential of blockchain-ETFs to be part of your investment strategy, consider the role that Nonbank will play in meeting your crypto-related financial needs. With a focus on security and user experience, Nonbank's digital wallet is a valuable resource for investors who want to manage their digital assets in conjunction with traditional investments.
