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Blockchain technology, known for powering popular cryptocurrencies like Bitcoin and Ethereum, has applications that extend beyond just digital currencies. It functions as a secure, decentralized ledger system where information is stored across multiple computers on a shared network. This feature makes blockchain ideal for industries where data security is of utmost importance, such as in banking.
As a retail investor, there are various ways to get involved in this evolving technology. Before delving into investment opportunities, let’s delve into the fundamentals of blockchain and understand why it is gaining significance.
Understanding Blockchain Technology
Blockchain technology serves the purpose of reducing the risk of fraud, corruption, or data manipulation by central authorities. By providing access to information on an open ledger visible to all participants, blockchain makes it extremely difficult for any single entity to alter data. Moreover, by linking verified data and making it accessible to all, blockchain streamlines processes that were previously cumbersome, such as manual record-keeping.
For example, retail giant Walmart employs blockchain to ensure food safety by tracing products back to their origin. In the event of a foodborne illness outbreak, the company can swiftly identify the source, preventing the spread of contaminated products.
Major corporations like Microsoft, PayPal, Starbucks, Salesforce, and IBM leverage blockchain for digital security, infrastructure, and automation purposes.
Investing in Blockchain
Aside from cryptocurrency trading and individual stock investments, investors can gain exposure to blockchain technology through exchange-traded funds (ETFs). These specialized ETFs hold a portfolio of publicly traded companies involved in blockchain technology or those that benefit from supporting services in the industry.
It’s important to note that blockchain ETFs do not directly hold cryptocurrency assets but rather invest in established global companies, many of which are leading technology firms.
Top Blockchain ETFs
The landscape of blockchain ETFs is relatively sparse, with only a few offerings available. Since there are no pure-play blockchain companies, the holdings in these funds often overlap with broader ETFs.
Below are some of the top blockchain ETFs based on assets under management as of September 25, 2024:
| ETF Name | Expense Ratio (Percent) | Assets Under Management |
| Amplify Transformational Data Sharing ETF (BLOK) | 0.76 | $702 million |
| Siren Nasdaq NexGen Economy ETF (BLCN) | 0.68 | $63 million |
| First Trust Indxx Innovative Transaction & Process ETF (LEGR) | 0.65 | $105 million |
| Bitwise Crypto Industry Innovators (BITQ) | 0.85 | $126 million |
| Global X Blockchain ETF (BKCH) | 0.50 | $151 million |
Amplify Transformational Data Sharing ETF (BLOK)
BLOK stands out as a prominent blockchain ETF that actively selects global companies involved in developing and implementing blockchain technologies.
- Top Holdings: Core Scientific Inc (CORZ), Galaxy Digital Holdings (GLXY), MicroStrategy Inc (MSTR)
- Expense Ratio: 0.76%
- Assets Under Management: $702 million
Siren Nasdaq NexGen Economy ETF (BLCN)
BLCN holds a portfolio of global companies that support the research and development of blockchain technology.
- Top Holdings: MicroStrategy (MSTR), Coinbase Global (COIN), Block Inc (SQ)
- Expense Ratio: 0.68%
- Assets Under Management: $63 million
First Trust Indxx Innovative Transaction & Process ETF (LEGR)
LEGR provides exposure to a diverse array of global companies with varying levels of involvement in blockchain technology.
- Top Holdings: Intel (INTC), JD.com (JD), Paypal Inc (PYPL)
- Expense Ratio: 0.65%
- Assets Under Management: $105 million
Bitwise Crypto Industry Innovators (BITQ)
BITQ tracks an index of 30 crypto companies worldwide, with some deriving a significant portion of their revenue from crypto assets.
- Top Holdings: MicroStrategy Inc (MSTR), Mara Holdings Inc (MARA), Coinbase Global (COIN)
- Expense Ratio: 0.85%
- Assets Under Management: $126 million
Global X Blockchain ETF (BKCH)
BKCH invests in global companies involved in various blockchain activities such as digital asset mining and integration.
- Top Holdings: TeraWulf Inc (WULF), Mara Holdings Inc (MARA), Iris Energy LTD (IREN)
- Expense Ratio: 0.50%
- Assets Under Management: $151 million
Cryptocurrency vs. Blockchain ETFs: Understanding the Differences
For those interested in digital currencies like Bitcoin and Ethereum, ETFs offer a traditional exchange-based investment option. However, the crypto space also provides direct ownership or futures contracts as alternatives.
Specialized crypto exchanges such as Coinbase or Binance cater to traders looking to engage in digital currency transactions like Bitcoin.
Additionally, traditional brokers like Charles Schwab and Interactive Brokers offer avenues to buy and sell cryptocurrencies, including Bitcoin futures contracts.
Risks Associated with Emerging Technologies
Similar to other thematic investments such as electric vehicles or artificial intelligence, blockchain ETFs come with inherent volatility. Market-related risks, pricing fluctuations, and regulatory changes can impact the performance of these investments.
Bitcoin, for instance, has faced skepticism from regulators and investors despite being built on blockchain technology. This uncertainty contributes to the volatility associated with the digital currency.
Assessing the value of cryptocurrencies like Bitcoin, Ethereum, XRP, and Cardano remains a challenge for both sophisticated and retail investors. The evolving landscape of cryptocurrency trading and blockchain adoption indicates a growing trend with continued interest in these technologies.
Editorial Disclaimer: Investors are encouraged to conduct their own research on investment strategies before making decisions. Past performance of investment products is not indicative of future price movements.