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Blockchain ETF 101: Definition, Criticism, and Examples

Last Updated on February 29, 2024 by Ameer Hamza

Mostly recognized for its role in upholding decentralised records of bitcoin exchanges, blockchain technology can be applied in a range of sectors with various use cases. In addition, Blockchain exchange-traded funds give investors a chance to make money from the technology. Below, we explore Blockchain exchange-traded funds, or ETFs, as well as examples. 

What Is a Blockchain ETF?

Blockchain exchange-traded funds (ETFs) are ETFs that invest in the stocks of companies that use blockchain technology to run their operations or to make a profit. These funds are maintained actively, while some are passively managed and just track a specific index. 

Blockchain-based ETFs offer investors some advantages. They enable real-time trading with tick-by-tick price swings, much like stocks, and they group assets into stock baskets, just like mutual funds.

The Risks and Rewards in the Evolving Technological Landscape

On the one hand, blockchain ETFs have seen many positive gains. However, on the other hand, concerns regarding the long-term viability of blockchain ETFs make investors continue to have doubts. This scepticism comes from the thought that blockchain might not live up to its full potential and be widely used in many fields, which is normal for any new technology.

Thus, we have to take into consideration that the emergence of blockchain ETFs is relatively new. As a result, identifying patterns or drawing definitive assessments from their performance is somewhat tricky. 

Ultimately, investors need to keep in mind that investing in technology-based businesses and encountering regulatory obstacles worldwide is an inherent risk associated with blockchain exchange-traded funds (ETFs). 

Examples of Blockchain ETF 

BLOK

This refers to an actively managed fund that invests in companies that develop or use “transformational data sharing technologies.” It is called the Amplify Transformational Data Sharing ETF. It has a 0.75 percent cost ratio and no underlying index.

In addition, with $850 million in assets under management as of January 2024, the fund has produced an annual return of 17.55% over the previous five years. Of its assets, BLOK allocates 47% to technological services and 19% to financial services. Furthermore, as of October 2023, its major holdings include Marathon Digital Holdings, Inc., Microstrategy, Inc., and Coinbase Global, Inc.

BLCN

The Siren Nasdaq NexGen Economy aims to mimic the returns of the global enterprises that comprise the Siren Nasdaq Blockchain Economy Index, an index dedicated to blockchain development. 

BLCN was one of the earliest exchange-traded funds (ETFs) focused only on blockchain technology. It has managed assets worth $71.8 million as of January 2024, with an average performance of 4.38% over the past five years. Galaxy Digital Holdings, Coinbase Global, Inc., and Microstrategy Inc. are its top holdings, with a 0.68% expense ratio.

Takeaways

Investors can profit from blockchain technology’s many use cases outside of cryptocurrency exchanges by investing in blockchain exchange-traded funds (ETFs). 

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