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Blockchain: Blockchain ETFs vs. Bitcoin ETFs – Understanding the Differences

Last Updated on February 29, 2024 by Ameer Hamza

Blockchain exchange-traded funds and Bitcoin exchange-traded funds are terms that are popularly known especially by people enthusiastic about the blockchain. However, people tend to wrongly use both terms interchangeably. Although both terms indeed complement each other, they are entirely different. Below, we explore both concepts and shed light on how to differentiate them.  

What Is A Blockchain ETF vs. Bitcoin ETF?

A blockchain exchange-traded fund is a group of traded companies with blockchain technology exposure. Basically, these companies can profit from their services to aid in the development, or they can use the technology directly. Blockchain ETFs come in two forms: actively managed and passively managed.

The bitcoin ETF creates a similar pool where investors can get daily price updates and the most recent updates about bitcoin exchange-traded funds. Generally, buying Bitcoin or even a small amount of it comes with a lot of risks. The Bitcoin ETF fund minimizes the cost implications and risks involved in buying Bitcoin. Investors can choose to receive daily price listings on both the domestic and global levels without having to purchase bitcoin directly.

Differences Between Bitcoin ETFs and blockchain ETFs 

Knowing the difference between the funds that Bitcoin exchange-traded funds and blockchain exchange-traded funds follow is necessary for understanding the differences between them. 

While a blockchain is the core database technology, bitcoin is a cryptocurrency. When seen in the context of investment instruments, this difference becomes important. 

Although there are Bitcoin futures available on well-known U.S. exchanges, its regulatory status is not entirely clear in some places because of concerns about criminal activity. By contrast, there is no regulatory scrutiny of blockchain technology, which is supported by major financial companies such as Visa and JPMorgan Chase & Co. 

While Bitcoin is volatile, blockchain ETFs provide stability, yet both are subject to regulatory changes and the nascent nature of blockchain technology.

The ETF Database shows that there are 25 Bitcoin and blockchain ETFs that are traded on U.S.A. marketplaces. These ETFs have assets under management (AUM) of slightly over $25 billion as of January 18, 2024, and their expense ratios range from 0.3% to 2.5%.

Distinguishing Features of Blockchain and Bitcoin ETFs

Bitcoin ETFs

  • Spot Bitcoin ETFs directly hold Bitcoin.
  • They are usually more volatile
  • Other Bitcoin ETFs monitor Bitcoin prices through investments in cryptocurrency futures.

Blockchain ETFs

  • They focus on companies that use blockchain.
  • It involves investing in shares of the company rather than cryptocurrency.
  • They tend to be a less volatile option.
  • There are many companies exploring the blockchain, and it isn’t tied to a particular business or product.

Takeaways

Although Blockchain ETFs provide stability by concentrating on companies that use the blockchain, Bitcoin ETFs deal directly with the cryptocurrency, bringing with it both popularity and volatility. The key takeaway is to be aware of these differences and to navigate the constantly changing world of digital assets, where ETFs are essential for simplifying access and reducing investor risk.

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