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Bitcoin and other cryptocurrencies can be among the most volatile securities in circulation today.

The safest way to invest in crypto companies and blockchain technology is through exchange-traded funds.

The Amplify Transformational Data Sharing ETF BLOK is, by far, the largest ETF focused on cryptocurrencies and companies that use or develop blockchain technology. It has assets of $1.3 billion and is actively managed. The second largest ETF in the space is the Siren Nasdaq NexGen Economy ETF BLCN, which is passively managed – it follows an index – and has $291 million in assets. Both funds were created on January 17, 2018. There is more about each of them below.

Cryptocurrencies – Risks and Rewards

Before researching blockchain ETFs, consider the risks of bitcoin and other digital currencies beyond volatility. For example, if you keep bitcoins in a digital wallet, make sure you don’t lose your password. An investor lost access to an account with 7,002 bitcoins in 2012, according to Yahoo Finance. This equates to over $327 million, based on BTCUSD
The stable price was at $46,777 on September 7.

There have also been difficulties for people who want to trade cryptocurrency in the days of high volatility, reports of hacked accounts and poor customer service at Coinbase Global Inc. COINAnd
With customers unable to recover lost bitcoins.

Coinbase said that only 0.01% of its customers were affected by “account takeovers,” and analysts who cover Coinbase stocks believe in the company. Of the 24 analysts polled by FactSet, 16 rated the stock as a “buy” or equivalent. On September 7, Needham analyst John Todaro kicked off his coverage of Coinbase with a “buy” rating and wrote that the company “has done a good job introducing new assets and new products in a regulated manner, and is well on its way to becoming a one-stop-shop for crypto financial services.”

Blockchain ETFs

Here’s How ETF Amplifies Transformational Data Sharing BLOK
and Siren Nasdaq NexGen Economy ETF BLCN
Since its inception, against the price of Bitcoin itself, in US dollars:

set of facts

Bitcoin is the best performer on the chart, up 322% since January 17, 2018, with the next BLOK coming back 159%, followed by BLCN with 104%. Of course, we cannot predict the direction of Bitcoin or other digital currencies, but the chart shows how volatile Bitcoin is compared to these ETFs.

To further illustrate the volatility, check out this chart showing the performance of the first two years of ETFs:

set of facts

As of January 17, 2018, the price of Bitcoin has fallen by as much as 71% until December 14, 2018. For the entire two-year period, it has fallen by 18%. Meanwhile, BLCN came back positive by 14% and BLOK rose by 1%. ETFs were less volatile.

Again, here are the total return comparisons for ETFs, Bitcoin, and for reference, the SPDR S&P 500 ETF Trust SPY
and Invesco QQQ Trust QQQAnd
Who tracks the Nasdaq-100 NDX IndexAnd
for different periods:

box or indicator

Total Return – 2021 until September 8

Total return 1 year

Total return – 2 years

Total return – 3 years

Total Return – January 17, 2018 to September 8, 2021

Amplify metadata sharing ETF BLOK

170%

113%

177%

164%

159%

Siren ETF Trust Siren Nasdaq NexGen Economy ETF BLCN

88%

44%

106%

113%

104%

Bitcoin (CME) Ongoing

58%

365%

345%

628%

322%

SPDR S&P 500 ETF Trust

44%

37%

57%

66%

72%

Invesco QQQ Trust

81%

42%

101%

115%

136%

Source: FactSet

BLOK is rated four stars (out of five) by Morningstar, while BLCN has a three-star rating. Since its inception, BLOK has more than doubled SPY’s yield, and easily outperformed QQQ.

Going back to the second chart above, which confirms Bitcoin’s decline in 2018, you can see that BLCN has been better than BLOK during this decline and for that two-year period.

It might be a good idea to consider how likely it is to wait for this difficult period while holding bitcoin. A broader investment in blockchain technology, with exposure to cryptocurrencies, may be a better fit for taking risks, with continued exposure to this technological phenomenon.

ETF wallets

During an interview, Christian Magon, CEO of Amplify, said he decided to take an active approach with BLOK because of the added flexibility.

The passive approach of creating an index of companies exposed to the blockchain might use algorithms to search for keywords in company files for “blockchain” and related words, as a way to identify companies using the technology. But Magon said that BLOK’s sub-advisor, Toroso Investments, “will take additional steps to verify the actual blockchain-related activities of the companies we invest in.”

This can be important in a relatively new space with a lot of buzzwords. You may remember the story of Long Island Ice Tea Corp. , which said in December 2017 that it would change its focus to investing in blockchain technology, while adopting the name Long Blockchain. It wasn’t good.

BLOK typically owns about 45 shares. Here are her top 10 sites:

a company

portfolio share

Market Cap (Million USD)

Total Return – 2021

Hut 8 Mining Corp. CA: HUT

6.9%

$1466

272%

MicroStrategy Corporation, Class A MSTR

5.5%

$4,971

64%

Digital Holdings Marathon

4.5%

$3,715

257%

PayPal Holdings Inc. PYPL

4.5%

$335,154

22%

Square Inc Class A M

4.4%

$101.225

17.%

Hive Blockchain Technologies Ltd. CA: HIVE

3.9%

1172 USD

72%

Galaxy Digital Holdings Ltd. CA: GLXY

3.9%

$2,037

145%

Nvidia Corp. NVDA

3.8%

$556,688

71%

Coinbase Global Inc. Class A coin

3.6%

$38980

Unavailable

Bitfarms Ltd. CA: BITF

3.6%

$993

201%

Sources: Amplify ETFs, FactSet

Click the indicators to learn more about each company. Here is a new guide to all the information available on MarketWatch’s quotes pages, which can start your research.

It might be surprising to see PayPal Holdings Inc. PYPL
and Square SQSP
In the wallet, but both offer services that allow customers to buy and sell bitcoin.

Magon emphasized that diversifying the BLOK wallet reduces risks, but acknowledged that the performance of the ETF remains closely tied to bitcoin.

Early this year, the Securities and Exchange Commission granted permission for BLOK to hold shares in Grayscale Bitcoin Trust GBTC.And
Which has a market capitalization of $6.6 billion. It has been a popular way for investors and traders to indirectly “play” Bitcoin. But it has its own risks, as its share price can sometimes rise to a very high premium over the fund’s net asset value (the value of its investments at the end of the trading day divided by the number of shares). This means that GBTC has an extra layer of volatility above the bitcoin price.

According to Magoon, GBTC is trading at a premium of up to 70% above NAV, although it has recently been trading below NAV.

Magon said that this additional volatility led to BLOK selling all of its GBTC position. She now owns shares in Canadian exchange-traded funds that invest in bitcoin. Magon says those tend to trade close to the NAV. An example of a block-holding Canadian Bitcoin ETF is Purpose Bitcoin ETF CA: BTCC.

BCLN tended to have more holdings than BLOK – 69 shares at the end of the second quarter. It is also less focused. The 10 largest holdings of BLOK make up 45% of the portfolio. For BLCN, the top 10 accounts account for 21%.

Here are the 10 largest holdings of BCLN:

a company

portfolio share

Market Cap (Million USD)

Total Return – 2021

Huobi Technology Holdings Ltd. HK: 1611

2.7%

509 dollars

108%

Coinbase Global Inc. Class A coin

2.4%

$38980

Unavailable

Accenture PLC Class A ACN

2.1%

$215,809

32%

Square Inc Class A M

2.1%

$101.225

17%

Advanced Micro Devices Inc. AMD

2.0%

$128,781

16%

Fujitsu Limited JP: 6702

1.9%

$39971

44%

Nvidia Corp. NVDA

1.9%

$556,688

71%

Z Holdings Corp. JP: 4689

1.9%

$50,552

18%

Digital Holdings Marathon

1.9%

$3,715

Unavailable

Nasdaq, Inc. NDAQ

1.9%

$33,178

50%

Sources: Siren ETFs, FactSet

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