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Blockchain's Back, But Not All Blockchain ETFs Are Created Equal

Stock MarketsSep 05, 2020 06:42AM ET
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© Reuters.

By Christiana Sciaudone -- With the U.S. dollar sinking and stock markets whipsawing, investors are hunting for ways to diversify.

And that's leading to a major jump in crypto interest, says Catherine Coley, chief executive officer of Binance.US, a digital asset marketplace, on Fortune.

How does one cautiously step into the world of digital currencies? If investors aren't ready to take the plunge and buy actual crypto quite yet, ETFs offer a way to play. But buyer beware: Unlike, gold, not all such ETFs are equal, and that can be seen in the performance of two of the best known, BLOK and BLCN.

Amplify Transformational Data Sharing (NYSE:BLOK) is actively managed by Toroso Investments.

"Some people believe it's the new gold," said Dan Weiskopf, a portfolio manager at Toroso who also goes by the Twitter handle @ETFProfessor. BLOK is a global equity portfolio of professionally-selected companies involved in the transformational data-sharing technology known as blockchain. Among the top holdings are GMO Internet, Square Inc (NYSE:SQ) and Z Holdings Corp (OTC:YAHOY). 

"We're not able to directly own crypto, but what we can do is identify those companies, like Square and Galaxy Digital, and Nvidia (NASDAQ:NVDA) as a chip maker and the miners that are going to be benefiting by the trend in crypto," Weiskopf said in a phone interview last month.

BLOK was launched in 2018, and is up 35% this year, compared to GLD (NYSE:GLD), up 29%. The Dow Jones Industrial Average is down slightly for 2020, and the S&P 500 is up 8.8%.

"It's very clear from headlines that we're seeing more evidence that people are really excited about owning more crypto," Weiskopf said. "We may use dollars or banks to transfer money but there is no question that crypto is being used abroad."

Reality Shares Nasdaq NexGen Economy (NASDAQ:BLCN) tracks the Reality Shares Nasdaq Blockchain Economy Index, created through a partnership between Reality Shares and Nasdaq. The index constitutes the research, analysis and investigation of both groups on the emerging development of blockchain technology. The Index is designed to measure the returns of companies that are committing material resources to developing, researching, supporting, innovating or utilizing blockchain technology for their use or for use by others.

Among its top holdings are (NASDAQ:OSTK), Square and DocuSign (NASDAQ:DOCU).  

Interestingly, not everyone is buying BLCN because of its blockchain theme.

"We rate these products not in relation to one another but prospects to the market," said Todd Rosenbluth, the senior director of ETF and mutual fund research at CFRA, in a phone interview last month. "We like BLCN but not necessarily as a call on blockchain as an entity," pointing as an example to the fact that Overstock's business isn't driven by blockchain.

This subcategory of ETFs is a great example of why an investor can't just look at a ticker, Rosenbluth said. While the overall theme is connected, it is like comparing apples and oranges.

Still, blockchain has the potential to affect so many different industries, Weiskopf said. It could be used as a ledger for everything from inventory management to home ownership validation. 

"More firms are embracing the blockchain than there were in 2018. There's no question about that. Whether or not bitcoin should trade at $10,000 or $20,000 is anybody's guess, but just like gold, it seems like the trend is your friend right now," Weiskopf said.  




Blockchain's Back, But Not All Blockchain ETFs Are Created Equal

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LonelyShepherd Sami
LonelyShepherd Sami Sep 05, 2020 8:16PM ET
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The markets are rigged !
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