If an investor is not ready for high volatility in the cryptocurrency market, then he can pay attention to a financial instrument that is directly related to the crypto industry: blockchain ETF.

What is a blockchain ETF

By itself, an ETF is a fund whose shares/shares are traded on an exchange. Blockchain ETF is a particular example of such a fund, the managers of which invest the funds of shareholders in companies, one way or another connected with the use and / or development of blockchain technologies.

Blockchain ETF should be distinguished from Bitcoin ETF or Crypto ETF. The last two are more focused on following the price of BTC or any other cryptocurrency. Blockchain-ETF gives the shareholder the opportunity to invest immediately in a wide range of organizations:

  1. Companies that directly invest in the crypto industry. Among the most famous are Elon Musk’s Tesla and Michael Saylor’s Microstrategy.
  2. Mining enterprises such as Riot Platforms, Argo Blockchain, Hut 8 Mining Corporation, Marathon Digital Holdings and others.
  3. Crypto exchanges. The most striking example is the American Coinbase, which has been trading its shares on the stock market for a long time.
  4. Financial organizations. This includes both investment companies and banks. This includes, for example, the largest investor in the planet BlackRock, as well as a number of large banks Wells Fargo, BNP Paribas, Citigroup.
  5. Technology companies. This category may include business representatives who are not directly related to cryptocurrency, but whose developments are actively used in blockchain projects. For example, chip developers like Nvidia and AMD.

Why you should invest in blockchain ETF

Investments in something are intended for one thing – to make a profit. However, cryptocurrencies themselves are an extremely volatile instrument. You can both earn quickly and lose quickly.

Buying shares of a single company is also quite risky. It is difficult to say for sure whether the price of specific shares will rise. And yes, anyone can go broke. A vivid example is the recent collapse of the Silvergate bank, a significant number of shares of which were in the hands of the aforementioned BlackRock. Although such a large investment company probably employs serious analysts.

And a blockchain ETF is such a diversified basket. Such funds, as a rule, invest in many companies at the same time. Therefore, by purchasing ETF units, you simply minimize the risks.

Let’s look at a few examples of large blockchain ETFs.

Fidelity Crypto Industry and Digital Payments ETF

The fund is owned by the financial company Fidelity Investments or simply fidelity. This is a fairly young ETF, which was formed in April 2022. It mainly invests in financial services and technology companies. Investments can be made both in American securities and in foreign ones. The fund focuses on the Fidelity Crypto Industry and Digital Payment Index, which reflects what is happening with cryptocurrencies, blockchain companies and organizations providing services in the field of digital payments.

The fund trades on the NASDAQ under the ticker symbol FDIG. The number of shares/units outstanding is 1.7 million. The price of one security of the Fidelity Crypto Industry and Digital Payments ETF at the time of writing, on Wednesday, March 29, was $14.25.

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Source: tradingview.com

The main share among the fund’s investments is occupied by Coinbase – 13.97%, Block Ink – 10.75% and Marathon Digital Holdigns Ink. – 10.55%. As you can see, all these companies are somehow connected with cryptocurrencies.

FDIG has a fairly small commission – 0.39%. The amount of the fund’s assets exceeds $20 million.

VanEck Digital Transformation ETF

The fund follows the MVIS Global Digital Assets Equity Index, which in turn focuses on companies involved in digital assets. The fund was formed in 2021. As with the Fidelity fund, this ETF also invested mainly in two sectors: financial services (nearly 59%), and technology companies (slightly more than 41%).

The largest share of the VanEck Digital Transformation ETF portfolio is Riot Platforms with 7.96%, Coinbase with 7.7% and MicroStrategy with 6.9%. More than a third of the fund’s investments are securities of non-US companies.

Shares of this ETF are traded on the NASDAQ under the ticker symbol DAAP. There are 6.5 million units in circulation in total. The price of one DAAP paper on March 29, 2023 was $4.08.

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Source: tradingview.com

The commission here is slightly higher than in FDIG and is 0.5%. Quantity assets exceeds $25 million.

Amplify Transformational Data Sharing ETF

It is the oldest blockchain ETF traded on exchanges. His investments are fully focused on companies related to the development of the blockchain. However, they belong to different sectors of the economy. Most ETF investments are made in IT companies (31%), as well as in the capital market (21%). The bulk of organizations are North American – 77%. European business accounts for only 2%.

The largest share in the fund’s investments is occupied by Riot Platforms – 5.6%, Coinbase – 5.32 and MicroStrategy – 5.24%. There are over 35 different securities in the Amplify Transformational Data Sharing ETF portfolio.

The fund’s shares are traded on the NYSE Arca platform under the ticker symbol BLOK. The total free float reaches 23.15 million. As of March 29, one security of the fund costs $17.97.

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Source: tradingview.com

Fund commission = 0.75%. The total number of assets exceeds $410 million.

iShares Blockchain and Tech ETFs

This fund tracks the results of an index that reflects the activities of US and foreign companies involved in the development, innovation and use of blockchain and crypto technologies. The ETF is fairly young. He was born only in April 2022.

The fund’s portfolio really represents all sectors of the economy related to the blockchain. There is also AMD – 4.58%, and NVIDIA – 4.27%. And the largest part of the capital, predictably, is invested in Riot Platforms – 15.56%, Coinbase – 12.02% and Block – 8.58%.

The iShares Blockchain and Tech ETF is traded on the NYSE Arca platform under the ticker IBLC. There are quite a few shares of the fund in free float – 400,000. The current price of one security is $14.93.

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Source: tradingview.com

Commission at IBLC is relatively small – 0.47%. The total assets of the fund are slightly less than $6 million.

Let’s summarizeA: A blockchain ETF is a diversified basket of companies that directly or indirectly promote blockchain technology. There are a lot of such funds in the American market. They differ in the composition of portfolios, the number of assets and the fees charged.

This material and the information in it does not constitute individual or other investment advice. The opinion of the editors may not coincide with the opinions of the author, analytical portals and experts.