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If you’re a trader or even a casual observer of financial markets, you’ve liekly heard about exchange traded funds (ETFs) and their popularity in equity markets. Blockchain exchange traded funds (ETFs) have also been gaining recognition in recent months, as investors look to gain exposure to companies involved in blockchain technology.
While there are currently only a handful of blockchain ETFs available, they have been attracting significant interest from investors. The reason for the high demand of the best blockchain ETFs is quite evident as they provide investors and blockchain enthusiasts with an easy way to gain exposure to a wide range of assets that have adopted blockchain technology.
The best blockchain ETFs offer investors access to a wide range of companies that are at the forefront of the blockchain revolution in the world. This includes companies that are involved in the development and implementation of blockchain technology. Read ahead to know more about some of the top blockchain ETFs and how they work.
Starting with the basics, at the forefront of the best blockchain ETFs is blockchain technology. Lately, the technology has been gaining immense recognition, with several companies, projects and even governments using it in their operations.
So what does blockchain technology mean?
Built using distributed ledger technology (DLT), a blockchain is a digital ledger of transactions. This ledger is distributed across a network of nodes, each of which verifies and timestamps each transaction. Transactions are then bundled together into blocks, which are then added to the chain in a certain order.
The hallmark of blockchain technology is the way it has revolutionized the exchange of value and transactions in a decentralized manner. With a wide range of benefits, blockchain technology continues to gain more traction across a steadily increasing number of industries.
Exchange traded funds (ETFs) are favored by millions of investors in the case of equity markets as they are simple investment products with high potential. ETFs are investment funds that trade on a stock exchange and can be bought or sold during trading hours of an exchange. They mirror the movement of an underlying asset, stock or a group of stocks. ETFs are highly popular since they are usually very easy to buy.
Blockchain ETFs work on the exact same principles, except that they track the performance of companies that are involved in blockchain technologies. Blockchain ETFs have paved the way for blockchain proponents who want to invest in blockchain companies or gain exposure to assets based on blockchain technology.
Blockchain ETFs enable investors to invest in a basket of blockchain assets without focusing on a single company. They are especially helpful for beginners or those without significant research. The professionals who manage the blockchain ETF carry out the required research for investments.
Blockchain ETFs have been accepted by mainstream investors increasingly in recent years as the underlying technology has gained mainstream attention and adoption. These funds offer a convenient and cost-effective way to gain exposure to the blockchain sector.
What are the top blockchain ETFs in the world today? While that is a tough question to answer- as the best option for you would be decided based on your investment goals and risk appetite- we can help you out with a list of seven of the best blockchain ETFs of 2023! They are operated by various companies and track different baskets of blockchain companies according to varied sets of criteria. Let’s find out more about them and how they’re different from each other!
The Bitwise Crypto Industry Innovators ETF (BITQ) is one of the best blockchain ETFs out there today that mirrors the Bitwise Crypto Innovators 30 Index. The index includes 30 companies that are involved in various aspects of the crypto industry, such as crypto mining firms and financial services companies. It holds over $46 million in assets with an expense ratio of 0.85%
Companies under the Bitwise Crypto Innovators 30 Index have to follow certain rules which includes having 75% of revenue from crypto operations or having 75% of net holdings in BTC or any other crypto. The index consists of 85% of such companies while the left out 15% cover large companies involved in crypto.
Being one of the top blockchain ETFs, the Global X Blockchain ETF (BKCH) holds $46.6 million in assets with an expense ratio of 0.50%. Its portfolio consists of 25 to 40 blockchain companies with the highest exposure to three companies which include a Bitcoin mining company called Marathon, the biggest mining facility of North America, Riot, a Bitcoin mining company, and the crypto exchange Coinbase.
Global X Blockchain ETF has been regarded as one of the best blockchain ETFs operating today, with a slew of reputed blockchain firms in its portfolio.
The Siren Nasdaq NexGen Economy ETF (BLCN) has been operating from 2018 and has accumulated $100 million of assets under management, making it one of the top blockchain ETFs. Having an expense ratio of 0.68%, it owns around 63 stocks, with the 4% of its assets accounting for the ten highest holdings of the ETF.
The crypto mining firm Marathon features in its portfolio, along with the cloud computing firm MicroStrategy, as it holds huge amounts of Bitcoin in its balance sheet. Another crypto mining company, Core Scientific Inc., is also part of its top holdings as it is a carbon-neutral blockchain firm based in North America
The Amplify Transformational Data Sharing ETF (BLOK), with its huge amount of net assets of $413 million, is one of the best blockchain ETFs in the sector. It was launched in January 2018, and currently has an expense ratio of 0.71%. BLOK has allocated 13% of its allocations to venture, 37% to transactional and 16% to crypto mining companies.
Micro Strategy heads its top three holdings, followed by the bank, Silvergate Capital Corp and Overstock.com, a retail company which has adopted Bitcoin as a payment method.
The First Trust SkyBridge Crypto Industry and Digital Economy ETF (CRPT) was launched almost two years back in September 2021, and it currently holds over $16 million in assets with an expense ratio of 0.85%. The ETF’s main goal is to invest 80% of its holdings in blockchain companies and become one of the best blockchain ETFs in the sector.
Within a short period of time, it has started being regarded as one of the top blockchain ETFs with its top three holdings being MicroStrategy, Coinbase, and the Canadian firm Galaxy Digital Holdings.
The VanEck Digital Transformation ETF (DAPP) is a passive ETF which mirrors the MVIS Global Digital Assets Equity Index, an index of companies involved in blockchain technology. It was launched in April 2021 and currently holds $22.9 worth of assets under management with an expense ratio of 0.50%. It has quickly advanced to be considered among the best blockchain ETFs active in the space today.
Currently, it is exposed to 24 companies, which are technology companies and financial services firms. It has also diversified 31% of its holdings outside the United States. Its top three holdings include Marathon Digital, Coinbase and Riot Blockchain.
The Fidelity Crypto Industry and Digital Payments ETF (FDIG) is operated by the reputed asset management firm Fidelity, and was launched just a year back in April 2022. It tracks the Fidelity Crypto Industry and Digital Payment Index.
Having 35 stocks in its portfolio, the ETF has 63% exposure to technology companies, with the rest being in the financial services industry. It holds $17.8 million assets under management with an expense ratio of 0.39%, while the companies Block, Coinbase and Marathon Digital comprise its top three stocks.
As companies that have already adopted blockchain witness previously unseen success, and blockchain keeps on disrupting more and more industries, blockchain ETFs are becoming as popular as its counterparts in the equity markets. The blockchain ETF industry is still in its nascent stage, to put it bluntly, and yet it has managed to roll out quite a few top blockchain ETFs with millions of dollars worth of assets under their management.
While there are currently only a handful of blockchain ETFs available, this is likely to change in the future as more issuers launch products tracking this emerging asset class. As there are some risks associated with blockchain ETFs, thorough research is required for you to select a blockchain ETF that would yield high returns in the future. We do hope this post has helped you learn in detail about some of the best blockchain ETFs in 2023!
ETFs are perfect for beginners as they expose them to a basket of assets instead of a single company. The magnitude of risk decreases through ETFs, while the chances of high profits also increase through a well diversified portfolio in an ETF. Beginners should definitely try ETFs at the start of the investing career.
ETFs are definitely safer than individual stocks as they comprise a group of companies in a well diversified portfolio. Even if one company fails in the portfolio, the ETF broadly remains unaffected due to its exposure to multiple companies. On the other hand, exposure to individual stocks increases chances of your returns being wiped out at a single session of loss.
Yes, ETFs do pay dividends to their investors from the dividend pool they accumulate from their allocated companies. But in some cases, investors also have the option of reinvesting their dividends back into the ETF to grow their personal portfolio faster.
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