While regulators are telling ETF issuers to scrap plans for funds based on the cryptocurrency, new avenues for digital currency are emerging: blockchain ETFs promising exposure to blockchain companies.
Among financial technologies, blockchain is fairly new. Originally created as a centralized ledger and record-keeping system for digital currency transactions, blockchain is almost a decade old. However, the rise of the private blockchain is cited as 2014 and its believed that Wall Street did not validate the technology until 2015.
These days, blockchain is booming and data confirm as much.
“International Data Corporation’s (IDC) Worldwide Semiannual Blockchain Spending Guide reported that global spending on blockchain solutions is forecast to reach $2.1 billion in 2018, more than double the $945 million spent in 2017,” said ETF issuer First Trust.
“IDC sees blockchain spending hitting $9.2 billion in 2021. It is projecting a five-year compound annual growth rate of 81.2% through 2021. The U.S. is expected to account for 40% of worldwide spending over the period, followed by Western Europe and China.”
There are now three, very new blockchain ETFs to consider. Be advised that elder statesmen of this trio are not even two weeks old, but these funds do offer significant upside potential for blockchain believers.
Blockchain ETFs: Amplify Transformational Data Sharing ETF (BLOK)
Expense ratio: 0.7% per year, or $70 on a $10,000 investment.
The Amplify Transformational Data Sharing ETF (NYSEARCA:BLOK) does not sound like it is a blockchain ETF, but it is. Actually, none of the blockchain ETFs’ names imply involvement in this fast-growing technology because the Securitites and Exchange Commission (SEC) has warned companies and fund issuers about the use of “blockchain” in their names.
With that bit of housekeeping out of the way, BLOK is an actively managed ETF, meaning it does not follow an index. Either way, BLOK is at the forefront of an emerging financial technology.
“According to Gartner Group, Blockchain is estimated to have delivered $4 billion in business value-add or technology innovation in 2017, with that growing to $21 billion by 2020, $176 billion in 2025, and $3.1 trillion by 2030,” said Amplify, BLOK’s issuer.
Well-known holdings in BLOK include Nvidia Corp. (NASDAQ:NVDA ) along with Dow components International Business Machines Co. (NYSE:IBM ) and Intel Corp. (NASDAQ:INTC). Investors are already flocking to BLOK. This blockchain ETF debuted on Jan. 17 and already has $169.6 million in assets under management.
Blockchain ETFs: Reality Shares Nasdaq NextGen Economy ETF (BLCN)
Expense ratio: 0.68% per year
Like the aforementioned BLOK, the Reality Shares Nasdaq NextGen Economy ETF (NASDAQ:BLCN) cannot have blockchain in its name, but this is a blockchain ETF. BLCN is a passively managed ETF tracking the Reality Shares Nasdaq Blockchain Economy Index.
“BLCN uses the Blockchain Score company rating methodology, which is designed to identify the companies that may benefit most from blockchain technology,” according to Reality Shares.
BLCN holds 59 stocks from the technology, financial services, healthcare and industrial sectors. None of BLCN’s holdings command weights above 2.43%. Top 10 holdings in this new ETF include Intel, IBM and Microsoft Corporation (NASDAQ:MSFT).
BLCN is also rapidly attracting a following as highlighted by its ability to gather $85.8 million in assets after coming to market on Jan. 17.
Blockchain ETFs: First Trust Indxx Innovative Transaction & Process ETF (LEGR)
Expense ratio: 0.65% per year
The First Trust Indxx Innovative Transaction & Process ETF (NASDAQ:LEGR) is the newest member of the blockchain ETF fray, having come to market on Jan. 25.
LEGR tracks the Indxx Blockchain Index. This new blockchain ETF splits member firms into three groups: active enablers, active users and active explorers. Active enablers are defined as companies that are actively engaged in the development of blockchain technologies while active users are those companies that actively using the technology. Active explorers are those companies that have publicly disclosed plans to possibly use the blockchain.
“A growing number of industries and institutions are looking to embed blockchain technology into their day-to-day processes,” said First Trust. “Blockchain allows customers and suppliers to connect directly, without the need for a central entity, like a bank or financial institution, to make a transaction.”
LEGR only holds companies with market values of at least $500 million and 20-day and three-month average daily volume of at least $3 million.
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.
