Returns as of 01/14/2022
Returns as of 01/14/2022
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Blockchain technology has a promising future. Thousands of cryptocurrencies have popped up in recent years to capitalize on the potential, but that might be a risky investment you aren’t ready to embark on.
Not to worry, though. Plenty of companies with publicly traded stock are also developing blockchain technology and putting it to use in their operations. Buying an exchange traded fund (ETF) composed of these companies could be a great place to start investing in blockchain.
Image source: Getty Images.
A blockchain is a digital ledger (basically software) that is distributed across a network of users. It’s the basic building unit of cryptocurrencies, but it has a wide range of uses such as building decentralized finance (DeFi) services, enabling smart contracts, and giving artists new ways to create work and interact with patrons.
With so many uses for blockchain technology, there are plenty of companies putting it to good use. That’s why an ETF that specializes in blockchain and crypto companies is a great place to get started when investing in the future of the financial services sector.
Total Assets Under Management
Amplify Transformational Data Sharing ETF (NYSEMKT:BLOK)
The largest blockchain ETF by net assets.
Siren Nasdaq NexGen Economy ETF (NASDAQ:BLCN)
This ETF is focused on tracking the Nasdaq Blockchain Economy index.
First Trust Indxx Innovative Transaction & Process ETF (NASDAQ:LEGR)
This ETF has a portfolio of more than 100 stocks with exposure to blockchain technology.
Bitwise Crypto Industry Innovators ETF (NYSEMKT:BITQ)
Launched in 2021, this is a focused portfolio of crypto and Bitcoin (CRYPTO:BTC) stocks.
Global X Blockchain ETF (NASDAQ:BKCH)
Another newcomer in the blockchain ETF space.
Data as of Jan. 11, 2022.
Far and away the largest blockchain ETF based on assets (managing $1.06 billion as of January 2022), Amplify Transformational Data Sharing ETF is a good choice to begin your search for the best blockchain and crypto industry ETFs. The fund has a 0.71% expense ratio, so, for a $1,000 investment, $7.10 will be deducted each year in fees from the fund’s performance.
The Amplify Transformational Data Sharing ETF contains 47 stocks from around the globe — about three-quarters are exposed to North American companies, with the balance located in Asia and Europe. It was launched in January 2018 and has almost doubled in value, although most of the return came in 2020 when high-growth tech stocks rose early in the pandemic.
Top holdings in the fund include crypto trading marketplace Coinbase Global (NASDAQ:COIN); semiconductor leader Nvidia (NASDAQ:NVDA), which designs GPUs, the hardware necessary for crypto mining; and commodities exchange CME Group (NASDAQ:CME), which supports Bitcoin (CRYPTO:BTC) and Ethereum (CRYPTO:ETH) derivatives contracts.
The Siren Nasdaq NexGen Economy ETF is far smaller than Amplify’s blockchain ETF product, but it offers investors a slightly different take on this space. It is composed of 64 stocks, focuses more on technology businesses, and reduces exposure to some of the cryptocurrency holding companies found in other similar ETFs. It has an expense ratio of 0.68%.
This ETF has a close to 50/50 split between U.S.-based and international companies. It was launched in January 2018 and has enjoyed a more than 70% return since inception at the time of this writing. Top holdings include Coinbase, as well as older, well-known tech giants such as IBM (NYSE:IBM), Accenture (NYSE:ACN), and PayPal Holdings (NASDAQ:PYPL).
Next up is the First Trust Indxx Innovative Transaction & Process ETF. First Trust is a larger company that has created all sorts of ETFs and other investment products, but this is one of its newer launches that also started in January 2018. The fund has 103 stocks, making it the most diversified blockchain and crypto ETF on this list. The First Trust Indxx Innovative Transaction & Process ETF has an annual expense ratio of 0.65%.
A little more than one-third of its portfolio includes U.S.-based companies. China ranks as the second-largest represented region, at 11% of holdings, with other countries in Europe and Asia making up the balance. Higher international stock exposure might appeal to some investors, but it has dragged down fund performance since early 2018. The ETF is up less than 50% since inception at the time of this writing.
As of January 2022, the top stocks in the First Trust Indxx Innovative Transaction & Process ETF were semiconductor firms Micron Technology (NASDAQ:MU), AMD (NASDAQ:AMD), Nvidia, Danish shipping company A.P. Moeller-Maersk A/S (OTC:AMKBY), and Cognizant Technology Solutions (NASDAQ:CTSH). If a well-diversified portfolio containing a smattering of businesses dabbling in blockchain is what you desire, First Trust’s ETF is worth a look.
A newcomer to the blockchain ETF party, Bitwise Crypto Industry Innovators ETF was launched in May 2021. It is comprised of 30 stocks and has a relatively high annual expense ratio of 0.85%.
The Bitwise Crypto Industry Innovators ETF differs from other funds on this list in an important way. The stocks that make up the portfolio are a more focused bet on the crypto economy, with many being Bitcoin miners and other outfits that are accumulating the top cryptocurrency. As of January 2022, the top holding was Coinbase. Tech firm and top Bitcoin holder MicroStrategy (NASDAQ:MSTR) ranks second, and bank and institutional crypto trading platform operator Silvergate Capital (NYSE:SI) comes in third. Together, the three stocks make up nearly one-third of the ETF’s portfolio.
Given its tilt toward companies that own Bitcoin and other crypto pure-plays, the Bitwise Crypto Industry Innovators ETF has generally followed the price of Bitcoin since inception. As of this writing, the fund is down 16%. But, at less than a year old, it’s too soon to tell how this ETF will fare. Still, if you’re looking for a way to invest in crypto without the extra complications of buying cryptocurrencies directly, this fund might be your ticket.
The Global X Blockchain ETF is the newest, smallest (by total assets), and youngest blockchain ETF on this list. Launched in July 2021, the ETF is comprised of only 25 stocks and has an annual expense ratio of just 0.5%.
High-growth tech stocks had a rough outing in 2021, reflected in Global X Blockchain ETF’s negative 10% return since inception as of this writing. There are a handful of tech companies in the portfolio such as Coinbase, Nvidia, and PayPal, but most of the holdings slant toward crypto mining firms. Bitcoin miners Riot Blockchain (NASDAQ:RIOT), Marathon Digital Holdings (NASDAQ:MARA), and Hut 8 Mining (NASDAQ:HUT) feature prominently in this fund.
Like the Bitwise ETF, Global X Blockchain ETF has generally followed the price of Bitcoin so far in its young history, but it has underperformed the top cryptocurrency due to underperformance of the tech and crypto stocks in the portfolio. Nevertheless, this is another solid option for investors looking for more of a pure-play on the crypto and blockchain economy.
Because blockchain technology is so new and implementation in its nascency, expect above-average volatility for these ETFs. While there is potential for huge investment returns, there is also the possibility the investments will lose value over time if the blockchain and crypto economy doesn’t take root as quickly as some expect. If you decide to invest, start small and maintain a long-term mindset in this fast-evolving realm of the fintech industry.
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Stock Advisor launched in February of 2002. Returns as of 01/14/2022.
Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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