Know what I get asked about most these days? I think you’ll only need one guess to figure it out. Yes, blockchain and bitcoin.
To a lot of people, the extraordinary buzz surrounding this NexGen theme seems to have started last year. That’s certainly when it snowballed, but believe it or not, we’re actually approaching the 10-year anniversary of blockchain.
I was looking at a fascinating graphic this week that lays out the major milestones in the history of blockchain, and it all started with a paper introducing bitcoin on October 31, 2008. The first bitcoin transaction took place a little over two months later. As the cryptocurrency grew over the next five years, innovators started considering other applications for blockchain technology, and the advancements and growing number of uses have continued ever since.
Even though we’re coming up on 10 years of blockchain, we’re really only in about the first or second inning of the ball game. It will take decades for blockchain to achieve what it is capable of. Think about the internet and how it took decades to evolve – as well as how much money was made from early investments. There is a lot to be made in blockchain for those who are smart about how they invest and don’t just chase the latest headlines.
Here is one of my absolute favorite stats that illustrates what I’m talking about: According to Gartner Group, blockchain is estimated to have delivered $4 billion in business value-add or technology innovation in 2017. By 2030, the number is predicted to be $3.1 trillion, which is 77,500% growth in just 12 years.
The big factor behind the potential growth of blockchain is that it can be used across a variety of industries. According to Deutsche Bank, about 10% of the global economy could be regulated by blockchain technology by 2027.
This isn’t just all high-tech stuff either. The first agriculture blockchain trade was made when a French company sold soybeans to a Chinese company. The transaction was done with a blockchain ledger and was able to cut the delivery time in half from two weeks to one week. Oil traders have already started implementing blockchain technology as well – all additional signs of how this NexGen trend is already underway.
Two New Blockchain Investments
With blockchain being one of the hottest NexGen themes around, it’s not surprising that new investment vehicles are popping up. We saw that just recently as two new blockchain exchange-traded funds (ETFs) hit the market in mid-January and are now available to investors who want to get a piece of the action.
The strategy for each ETF is to focus on companies that are major players in the blockchain sector. Interestingly, the SEC did not allow either ETF to use the term “blockchain” in its name and therefore the folks behind the scenes had to come up with some more creative verbiage.
The first one is called Reality Shares Nasdaq NexGen Economy ETF (BLCN). It is composed of 59 holdings with an average market cap of $115 billion. The annual expenses are 0.68%. The portfolio breakdown shows 57% in information technology, 32% in financials, and 8% in healthcare. Geographically the ETF has 46% exposure to North America, 29% to Asia and 25% to Europe. The top five holdings are Intel (INTC), Overstock.com (OSTK), IBM (IBM), Cisco Systems (CSCO) and Hitachi (HTHIY).
The second is called Amplify Transformational Data Sharing ETF (BLOK), and it is an actively-managed basket of stocks at the forefront of blockchain-based technology. There are a total of 48 stocks in the portfolio and the annual expense ratio is 0.70%. The sector breakdown is also heavily weighted to technology and the financials. The top holdings are Taiwan Semiconductor Manufacturing Company (TSM), Digital Garage (DLGEF), SBI Holdings (SBHGF), Overstock.com (OSTK) and IBM (IBM).
You’ll notice the one overlapping stock in the top holdings is OSTK, which is one I am watching closely. Overstock.com has swung from a low of $13.75 last May to nearly $90 in early January. The company began accepting bitcoin as payment for its goods back in 2014. This led to the creation of a subsidiary called Medici Ventures, which is a portfolio of blockchain technologies and businesses as well as an incubator for new blockchain ideas.
One of OSTK’s executives recently stated he felt that blockchain was more revolutionary than the internet, and I’m starting to believe that could be true – at a minimum, blockchain will be the biggest technological breakthrough since the internet.
OSTK was flying under the radar for months before the mainstream media began to catch on to Medici’s upside potential, which was aided by the surge in the price of bitcoin. The stock now trades on news about bitcoin and blockchain, creating moves in both directions. I’ll be watching for the right time to ride its next upswing in the months ahead.
With blockchain being such a powerful NexGen theme, I am happy to see the introduction of the new ETFs, and you know we’ll see many more ways to make money come along.