A safer way to invest in cryptos and blockchain technology companies is through exchange-traded funds.
The Amplify Transformational Data Sharing ETF BLOK is, by far, the most important ETF focused on cryptocurrencies and corporations that use or develop blockchain technology. It has $1.3 billion in assets and is actively managed. The second-biggest ETF within the space is that the Siren Nasdaq NexGen Economy ETF BLCN, which is passively managed — it follows an index — and has $291 million in assets. Both ETFs were established on Jan. 17, 2018. There’s more about each of them below.
Digital currencies — risks and rewards
Before digging into the blockchain ETFs, consider the risks of bitcoin and other digital currencies beyond volatility. for instance, if you hold bitcoin during a digital wallet, confirm you don’t lose your password. One investor lost access to an account with 7,002 bitcoin in 2012, consistent with Yahoo Finance. That equates to quite $327 million, supported bitcoin’s BTCUSD settled price of $46,777 on Sept. 7.
There have also been difficulties for people that wish to trade cryptocurrencies on days of high volatility and reports of hacked accounts and poor customer service at Coinbase Global Inc. COIN, with customers unable to recover lost bitcoin.
Coinbase has said only 0.01% of its customers are suffering from “account takeovers,” and analysts covering Coinbase’s stock are believers within the company. Among 24 analysts polled by FactSet, 16 rates the stock a “buy” or the equivalent. On Sept. 7, Needham analyst John Todaro initiated his coverage of Coinbase with a “buy” rating and wrote that the corporate “has done an honest job of offering new assets and new products during a regulatory compliant manner, and is well on its thanks to becoming a one-stop buy crypto financial services.”
Here’s how the Amplify Transformational Data Sharing ETF BLOK and therefore the Siren Nasdaq NexGen Economy ETF BLCN have performed since they were established, against the worth of bitcoin itself, in U.S. dollars.
Bitcoin has had the simplest performance on the chart, rising 322% since Jan. 17, 2018, with BLOK next, returning 159%, followed by BLCN, at 104%. Of course, we cannot predict the direction of bitcoin or other digital currencies, but the chart shows what proportion more volatile bitcoin has been than these ETFs.
Starting from Jan. 17, 2018, bitcoin was down the maximum amount of 71% through Dec. 14, 2018. For the entire two-year period, it had been down 18%. Meanwhile, BLCN returned a positive 14% and BLOK was up 1%. The ETFs are less volatile.
Once again, here are total return comparisons for the 2 ETFs, bitcoin and, for reference, the SPDR S&P 500 ETF Trust SPY and therefore the Invesco QQQ Trust QQQ, which tracks the Nasdaq-100 Index NDX, for various periods: