An exchange-traded fund (ETF) is one of the most valuable products created for investors. It gives them a way to track underlying real-world assets like gold, oil, cryptocurrency, and other commodities. Investors can buy shares in an ETF and earn returns.
The shares of an ETF can be traded as stock and make it easy to invest without having to purchase the assets tracked. They have a ticker symbol, and price data can be obtained during the typical trading day.
ETFs have been around for a long time and have been used to track benchmark indexes such as the NASDAQ-100, the Standard & Poor’s (S&P) 500, and the US Dow Jones Industrial Average (DJIA). Stock market investors also use these indexes to monitor their portfolio strength as well as compare it with the overall market.
Why Invest in Blockchain ETFs?
Cryptocurrency powers most blockchain projects, so they are incredibly risky to use. The regulatory atmosphere of the industry only makes the situation worse. Since ETFs can be used to track cryptocurrency, investors do not have to buy actual digital currency. Instead, they can buy an ETF that tracks it. Blockchain ETFs also allow investors to take advantage of the rapidly growing ecosystem by investing in many companies at the same time without doing any of the legwork. It is safer and more convenient than other investment options.
What are the top 7 blockchain ETFs to invest in?
There are many blockchain ETFs listed on the market. However, the following are the top 7 that investors should consider:
BCLN was created in January 2018, as a way to replicate the recorded returns of the Reality Shares NASDAQ Blockchain Economy Index. For this replication to be achieved, the fund invests most of its asset pool, totaling $72.41 million, in securities that form the benchmarked index. These securities span across several industries, including finance, IT, and industrials.
Each company on its list of holdings has an affiliation with blockchain technology, either through investment, partnership or operations. The BCLN portfolio has 59 holdings, with the top 10 holdings having a combined weighting of 33.71%. They include Hundsun Technologies Inc at 3.67%, YGSOFT Inc at 3.58%, NetEase Inc at 3.52%, Alibaba Group Holding Ltd at 3.45%, ZTE Corp at 3.42%, and Intel Corporation at 2.35%.
BCLN has an expense ratio of 0.68%, returns of -6.20 in the past month and -24.85% since inception as at 10 January 2019. So far, the ETF has had a rough ride but shows excellent potential for the future.
BCNA ETF focuses on China which is the second largest stock market in the world. It focuses mainly on blockchain-related companies in China and Hong Kong, with 68.50% and 31.50% distribution respectively. The fund tracks companies that are involved with blockchain technology in various capacities, including development, research, innovation, support, and use.
The ETF chooses stocks based on factors such as the stage of their products, role in the blockchain ecosystem, number of blockchain filings, economic impact, level of innovation, R&D expenditures, and blockchain institute membership. BCNA has a competitive expense ratio of 0.78%, returns of -0.79% in the last month and 4.13% since inception.
BCLN’s basket contains 39 holdings, including Hundsun Technologies Inc. Class A at 3.64%, YGsoft Inc. Class A at 3.55%, Alibaba Group Holding Ltd. Sponsored ADR at 3.43%, ZTE Corporation Class H3.39%, Tencent Holdings Ltd.3.36%, and HyUnion Holding Co., Ltd. Class A. Like the other ETFs on this list, BCNA’s holdings span across the technology, finance, telecommunications and industrials sectors.
BLOK was launched in January 2018 as a portfolio of investments in blockchain companies as well as firms in active partnership with such companies. Its basket contains more than 50 holdings and its net assets under management total more than $104.41 million.
The ETF's basket contains 45 holdings, including GMO internet inc at 4.41%, Digital Garage at 4.32%, Square inc at 3.90%, SBI Holdings inc at 3.87%, Overstock.com inc del at 3.65%, and Alphabet inc at 3.13%. These holdings are spread across the IT, telecommunications, banking and media industries.
The fund charges investors a 0.7% annual management fee. BLOK has returned -10.57% over the past month, 25.71% over the past three months, and -24.66% since inception in what has been a weak year for blockchain and the cryptocurrency markets. However, BLOK has seen positive returns too in an incredibly volatile market.
Led by Brian Kelly, BKC aims to generate returns on global blockchain companies. The ETF targets explicitly companies that mine, trade, develop, use or promote cryptocurrency adoption.
It currently has a total of 35 holdings including Square, Inc. at 4.48%, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR at 4.28%, CME Group Inc. Class A at 4.26%, Signature Bank at 4.26%, and GMO Internet Inc. at 4.06%. BKC is perfect for investors who do not want to deal with security issues since the ETF complies with US tax laws and RIC requirements. So far, it has seen returns of -0.26% in the past month and 5.33% in the past year.
KOIN is an ETF which uses artificial intelligence to track global stocks related to blockchain technology. It uses a unique algorithm which reads text data, to select the best companies from online platforms and databases. The chosen companies are classed as mining enablers, cryptocurrency payees, solution providers, and users.
The ETF contains 45 holdings across several sectors including technology, finance, and telecommunications. KOIN’s most significant holdings include Amazon.com, Inc. at 4.61%, Visa Inc. Class A at 4.56%, Intel Corporation 4.55% BP PLC at 4.50%, Mastercard Incorporated Class A at 4.46%, Nestle S.A. at 4.26%, and Microsoft Corporation at 4.25%among others.
Performance-wise, KOIN is forging ahead with returns of 0.02% in the last month and 5.38% in the past year.
LEGR chooses the best blockchain companies to invest in, based on criteria such as annual reports, industry reports, and press releases, Based on this prior assessment, the ETF classes companies into three tiers:
- Active Enablers: companies that develop blockchain products, or services, for internal use or sale.
- Active Users: companies that use blockchain technology, with the support of an active enabler.
- Active Explorers: companies that have expressed intention to incorporate blockchain into their operations, without an active use case in place. Only active enablers and active users are eventually picked.
Currently, LEGR has 97 holdings, including Intel Corporation at 2.15%, PayPal Holdings Inc at 1.99%, Oracle Corporation at 1.97%, Microsoft Corporation at 1.85% and Alibaba Group Holding Ltd. Sponsored ADR at 1.85%. In the past month, LEGR has seen returns of 1.03% in the past month and 4.49% in the past year.
Just like KOIN, LDGR uses artificial intelligence to select the best blockchain stocks for investment. Its unique algorithm tracks the stocks with high levels of innovation and research primarily in the form of patents. The LDGR ETF also invests in companies that have a proven track record of blockchain investment. Like other ETFs, the journey has not been smooth, due to the general downturn of the cryptocurrency markets. However, it is set to bounce back soon.
Blockchain ETFs are a safe way for investors to sit back and enjoy the rapid development of blockchain companies. Large corporations such as Intel, Microsoft and Alibaba holdings have developed ties to blockchain that may be valuable to investors later. ETFs have generally performed poorly in the past year. However, there is hope that as the cryptocurrency market recovers according to recent predictions, ETFs will follow suit.