Blockchain ETF: A Compromise Between Crypto and Stocks?
There’s more to the blockchain than just bitcoin and other cryptocurrencies. If you’re interested in investment opportunities that go beyond buying coins, there are now plenty more options. Ever since the headlines about the world’s first bitcoin ETF, more products have been launched, and blockchain ETFs are one of the most promising.
When the first bitcoin ETF was approved last year, it felt like the start of a revolution. Fast forward to today and many more blockchain ETFs have entered the market—but despite gaining traction in the investment world, they’ve mostly flown under the radar when it comes to media coverage.
If you feel like it’s time for you to be let in on finance’s best-kept secret, you’re in the right place. We’ll run through everything you need to know, including how to invest in blockchain ETFs and our top picks.
What’s a blockchain ETF?
It wouldn’t be right to explain blockchain ETFs without outlining how standard ETF investing works. An exchange-traded fund is an investment product that contains a range of assets and shares, allowing investors to build a more diversified portfolio. ETFs trade during market hours, so traders can buy and sell them instantly as long as the markets are open (unlike mutual funds).
The only difference between a standard and blockchain ETF is that a blockchain ETF focuses on companies involved in (you guessed it) blockchain technologies. These firms include obvious contenders, such as the cryptocurrency exchange Coinbase—but tech startups exploring blockchain may also be included. Some funds take a wider definition of “blockchain involvement” than others, which is something to look out for.
As you may have noticed, we haven’t said anything about individual cryptocurrencies. That’s because blockchain ETFs contain publicly-traded companies and have no direct exposure to cryptocurrencies, unlike crypto ETFs. This makes them much more regulator-friendly, and also fairly accessible for the average investor to get involved in.
How to invest in blockchain ETFs
Since blockchain ETFs consist of publicly traded stocks, you can invest in them in much the same way as you would traditional ETFs. Simply head to a broker (e.g., Robinhood), search for the ETF you want, and purchase it when the market opens. It really is that simple.
Yet note that, although blockchain ETFs are generally safer than bitcoin ETFs, they still carry risks. New industries are always volatile, and blockchain certainly fits that bill. And if you’re prepared to take the risk, make sure you choose your funds wisely and understand what they consist of.
What is the best blockchain ETF for 2022?
Now, we can finally get into our breakdown of the best ETFs for blockchain. As a forewarning: You might notice that some of the year-on-year performances below look less than appealing. That’s primarily because of a turbulent market at the time of writing (June 2022), and it’s tough to get a broader picture of performance when most of these funds have only been around for a couple of years.
Again, blockchain investing isn’t for the faint of heart.
Siren Nasdaq NexGen Economy ETF (BLCN)
- Launched: 2018
- Issued by: Siren ETFs
- Performance over past year: -37.92%
- Assets managed: $154 million
First off we have BLCN, which follows the Nasdaq blockchain Economy Index and contains a mixture of growth and value stocks (where growth stocks are newer companies that carry greater risk and value stocks are more established companies).
The index in question consists of various businesses that are likely to be involved in blockchain as it develops (or which currently use the technology). There are plenty of familiar names—think Mastercard and IBM.
Bitwise Crypto Industry Innovators ETF (BITQ)
- Launched: 2021
- Issued by: Bitwise Asset Management
- Performance over past year: -65.12%
- Assets managed: $100 million
It might be new, but the BITQ fund is making waves, having reached $100 million in less than a year.
As the name suggests, the fund aims to invest in companies that are innovating in the blockchain space by generating most of their revenue from crypto-related activities. Its biggest holdings currently are Galaxy Digital Holdings (a broker-dealer) and MicroStrategy (business services and software).
First Trust Indxx Innovative Transaction & Process ETF (LEGR)
- Launched: 2018
- Issued by: First Trust
- Performance over past year: -13%
- Assets managed: $156.7 million
In normal times, a performance of -13.7% wouldn’t exactly sound appealing—but compared to the other funds on this list, it means LEGR is faring pretty well.
This fund focuses on companies involved in blockchain in a fairly broad sense—they can either be using the tech themselves, investing in it, or simply have blockchain-adjacent products and services. Most of the fund comprises companies in the financial sector, but there are also a fair amount of IT stocks thrown in.
VanEck Digital Transformation ETF (DAPP)
- Launched: 2021
- Issued by: VanEck
- Performance over past year: -64.5%
- Assets managed: $34 million
We promise we didn’t just choose it for the name, although it may have swayed us subconsciously. DAPP is another newer ETF, and it also has fewer assets under management than our other picks. But it’s still a promising fund—and with half of its stocks from outside the US, it’s great for those who want exposure to international markets.
Amplify Transformational Data Sharing ETF (BLOK)
- Launched: 2018
- Issued by: Amplify
- Performance over past year: -44.8%
- Assets managed: $803.4 million
Another aptly named fund, BLOK aims to expose its investors to crypto indirectly. Although it focuses on companies in software and IT, not all of them are using blockchain technologies themselves (although the majority are). It has a lot of Coinbase shares, alongside other holdings.
Having launched in January 2018, it’s one of the oldest and most established funds on the list, as the impressive value of assets managed reflects.
Investing with MyConstant – an alternative to blockchain ETF
Blockchain ETFs are all well and good, but you might not be ready to give up on the prospect of standard crypto investment quite yet.
If you’d still like to invest in individual cryptocurrencies but wish it could be as simple as investing in blockchain ETFs, why not look at our new native MCT token?
It allows you to convert between multiple cryptocurrencies and access all kinds of other financial products, including investing and staking—all with a single coin. This way, you can experiment with different projects and ways to earn.
- Up to 12% APR from staking
- 20% more interest from MyConstant investing products
- 20% reduction in borrowing fees on MyConstant
- 50% discount on NFT fees through MyConstant
- 50% discount on crypto swap fees on MyConstant
Sound good? Sign up today to start benefiting.
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