What are Blockchain ETFs?
Blockchain is the underlying technology of cryptos, as well as the base for many other applications and use cases in various industries. Blockchain ETFs are funds which seek to invest in companies that either use, develop or research blockchain technology and its applications.
Blockchain ETFs track the prices of Bitcoin or other cryptocurrencies either by using futures contracts or by owning the underlying cryptos.
It should be mentioned that no blockchain stocks deal directly with cryptocurrencies. The regulators at SEC have so far shut down all Bitcoin ETF submissions, some of them stating that it could take several years to receive their approval.
In today’s article, we will be looking at the top blockchain ETFs to invest in 2019.
BLOK
Fund Name: Amplify Transformational Data Sharing ETF
Issuer: Amplify
Assets Under Management: $117.96M
Expense Ratio: 0.70%
Amplify and Reality Shares both launched their ETFs in mid-January of last year. BLOK owns stocks of some of the biggest companies on the market including IBM, NASDAQ, and Overstock, which have all manifested a keen interest in the blockchain. This fund has shown that it has an inclination towards firms based in Japan.
Other lesser known companies are Digital Garage Inc and GMO Internet Inc which are internet providers. BLOK, however, places them among the top in terms of holdings.
Digital Garage has struck partnerships with blockchain partners intending to make Japan the best market for cryptos. GMO Internet created in 2017 a “forex” exchange for crypto trading.
The most major difference which sets BLOK and BLCN apart is that Amplify’s is an actively managed ETF.
BLCN
Fund Name: Reality Shares Nasdaq NexGen Economy ETF
Issuer: Reality Shares
Assets Under Management: $85.93M
Expense Ratio: 0.68%
BLCN has over 60 stocks from companies that have activities related to the blockchain. The fund’s advisory board is comprised of crypto influencers that select the stocks to invest in.
In contrast to BLOK, BLCN is more oriented towards its native US market, having almost half of its stocks (45%) in American companies, with Japan-based companies representing just 14%. In theory, BLCN should be more stable as an ETFs, as 80% of its holdings consists of large-cap firms, while micro-caps represent 5%, and small-caps 2%.
The top two holdings are from Intel Corporation and Microsoft Corporation, both of which have performed very well this year on the stock market.
LEGR
Fund Name: First Trust Indxx Innovative Transaction & Process ETF
Issuer: First Trust
Assets Under Management: $46.18M
Expense Ratio: 0.65%
LEGR practices more diversification than the rest of its peers in terms of holdings, having a lower percentage of assets held in its top 10 stocks. LEGR appeared on the market just one week after BLOK and BLCN launched.
By using the Indxx Blockchain Index, they monitor the performance of companies from all over the world which they have either employed, developed, or invested in products based on blockchain technology.
First Trust Indxx invests in three types of blockchain stocks that belong to: companies that already have their blockchain-based products, companies that already use blockchain developments supplied by other companies, and companies that have just recently started getting into blockchain.
Even though it has a diverse investment approach, because the fund rebalances its holdings to other stocks once every six months, makes it the least attractive option on our list.
KOIN
Fund Name: Innovation Shares NextGen Protocol ETF
Issuer: Exchange Traded Concepts
Assets Under Management: $10.01M
Expense Ratio: 0.65%
The newest member of the ETF family is KOIN, a fund which employs artificial intelligence to find new blockchain stocks, targeting them with related keywords.
Mostly all of its holdings represent large-cap companies, two-thirds of them being U.S.-based. Some of the biggest company names involved are Microsoft and Visa, which will definitely attract investors looking for a sure bet.
BKC
Fund Name: REX BKCM ETF
Issuer: Exchange Traded Concepts
Assets Under Management: $5.32M
Expense Ratio: 0.88%
BKC joined the Blockchain ETF space in May, fronted by Brian Kelly, a Bitcoin supported and a recurrent contributor at CNBC. The companies that have the highest scoring in the fund are Overstock, GMO Internet and Global Unichip.
According to Kelly’s statement, BKC is a prime option for investors that are interested in cryptocurrencies but do not want to deal with its market volatility and security concerns. BKC has holdings from 32 companies.
BCNA
Fund Name: Reality Shares Nasdaq NexGen Economy China ETF
Issuer: Reality Shares
Assets Under Management: $1.93M
Expense Ratio: 0.78%
Another Blockchain ETF of Reality Shares is BCNA which focuses mainly on the Chinese market, being the world’s second largest stock market. Eric Ervin, its CEO, has noticed China’s interest for distributed ledger technology, having threefold as many patents than the US.
Their main holding is the Alibaba company, as well as A-Shares in China’s stock exchanges, the Shanghai Stock Exchange and the Shenzhen Stock Exchange. Prior to investing in a stock, they evaluate how many blockchain patents they have as well as how innovative they are. In the end, only the companies that score the highest are selected.
Final thoughts
Due to blockchain’s novelty there very few opportunities to directly invest in it. Most of the companies that are developing in this space are new start-up firms or are privately owned. The rest are ICOs which are being traded on unregulated markets on exchanges that are still working on their business standards.
As most Bitcoin ETFs are currently seeing denial form SEC, the second best alternative to investing in the crypto sphere are blockchain ETFs.
