Blockchain ETFs: Best ETFs List, Meaning, Working

Wondering how to tap into the fast-growing Blockchain Technology sector without purchasing Cryptocurrencies directly? Blockchain ETFs might be the perfect solution for you. These innovative investment funds offer a diversified and professionally managed way to gain exposure to companies involved in Blockchain Technology. 

In addition, MarketsandMarkets projects the global blockchain market to witness a CAGR of 66.2% from 2022 to 2027.But what exactly are Blockchain Exchange-traded Funds (ETFs), and how do they work? This blog will explore the best available ETFs in Blockchain, their meaning, and how they operate. Dive in and discover the top Blockchain ETFs that could shape the future of0 finance.

Table of Contents

1) What are Blockchain ETFs?

2) Top Blockchain ETFs in the Market

3) How does Blockchain ETF Work?

4) Why Invest in Blockchain ETFs?

5) How to Invest in Blockchain ETFs?

6) Cryptocurrency vs Blockchain ETFs

7) Conclusion

What are  Blockchain ETFs?

Blockchain ETFs (Exchange-traded Funds) are investment funds, which focus on companies involved in the development and utilisation of Blockchain Technology. It is a type of thematic ETF that invests in a varied portfolio of companies that are either actively using, developing or profiting from Blockchain Technology. Unlike Bitcoin ETFs, which track the price of Bitcoin, such ETFs invest in a broader range of assets related to Blockchain Technology.
 

Top Blockchain ETFs in the Market

There are several Blockchain ETFs available for investment. Here is a list of the top ETFs:   

1) Amplify Transformational Data Sharing ETF

The Amplify Transformational Data Sharing ETF is one of the most significant funds focused on the Cryptocurrency and digital asset market, with £745.38 million in assets under management as of 2022.

Even though it doesn't invest directly in Cryptocurrencies, it's an excellent place to start your quest for the top Crypto sector ETFs. The product has a 0.71% annual cost ratio, which means that for every £1,000 invested, £7.10 in fees are deducted from the annual fund's performance.  

The Amplify Transformational Data Sharing ETF holds 47 company stocks. It was introduced in January 2018, making it one of the most renowned ETFs on this list. However, this is still a new financial product in the broader scheme.

The fund's top assets include crypto trading platform Coinbase Global (NASDAQ: COIN) and semiconductor giant Nvidia (NASDAQ: NVDA), which produces GPUs, the hardware required for crypto mining.   

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2) Global X Blockchain ETF

The Global X Blockchain ETF focuses on Blockchain technology beyond Cryptocurrencies. It invests in 25 IT and Bitcoin mining companies that drive crypto innovation and support the underlying Blockchain infrastructure.

However, this is a new ETF product launch, which started in July 2021. The fund's annual cost ratio is approximately 0.5%. This new fund is worth exploring if you want concentrated investing exposure to crypto miners and Blockchain-related tech businesses like Coinbase.  

3) First Trust Indxx Innovation Transaction & Process ETF  

Another large crypto bet is the First Trust Indxx Innovative Transaction & Process ETF. The portfolio has 103 stocks, making it the most diverse crypto ETF on this list.

First Trust is also a significant and well-established organisation that has built a wide range of investment products, which may satisfy those investors concerned about track record and fund manager reputation.

The annual cost ratio of the First Trust Indxx Innovative Transaction & Process ETF is 0.65%, making it one of the cheaper alternatives in the market.  

4) Siren Nasdaq NexGen Economy ETF  

Another fund focusing on firms developing and utilising Blockchain technology is the Siren Nasdaq NexGen Economy ETF. Its assets under management are significantly lesser than those of Amplify's similar ETF product, but it does provide a slightly different perspective on this market.

The ETF is made up of 64 stocks. Its emphasis has broadened to include more general technology companies with a crypto or Blockchain section, such as IBM (NYSE: IBM), a top holding. It further includes shares of traditional lenders and digital payment networks like American Express (NYSE: AXP) and Visa (NYSE: V), who have begun to dabble in Cryptocurrency. It's a significantly more diverse approach to bet on the Cryptocurrency industry's growth.

5) Bitwise Crypto Industry Innovators ETF (BITQ)

The performance of the Bitwise Crypto Innovators 30 Index is tracked by the Bitwise Crypto Industry Innovators ETF (BITQ), a passively managed investment fund. This index consists of 30 stocks from businesses invested in the Cryptocurrency sector, including crypto mining operations, suppliers of mining equipment, and companies that provide financial services.

A business must generate at least 75% of its income from Cryptocurrencies or hold 75% of its net assets in Bitcoin or another crypto holding to be listed in the Bitwise Crypto Innovators 30 Index.

Almost 85% of BITQ's assets comprise index companies. The other 15% include large-cap firms indirectly related to Cryptocurrencies or owning at least £82 million in Bitcoin, Ethereum, or another Cryptocurrency.

6) Fidelity Crypto Industry and Digital Payments ETF (FDIG)

Fidelity Crypto Industry and Digital Payments ETF (FDIG) was launched in April 2022. FDIG is usually compared with the Digital Payments Index and Fidelity Crypto Industry. This index tracks the performance of Blockchain, Cryptocurrency, and Digital payment companies.

Currently, FDIG has about 35 stocks, of which the tech industry holds 63% of these stocks, and the other 33% of those stocks are in financial services.

How does Blockchain ETF Work?

Top Blockchain ETFs such as LEGR, BLCN and BLOK is designed to monitor the success of the Blockchain sector. The top ETFS in Blockchain all operate in similar ways. They invest in firms that are actively involved in the Blockchain industry.

The most frequent method is to buy stock in firms engaged in the mining process. However, some ETFs invest in firms creating new technologies for Blockchain-based solutions.  

For instance, one ETF can invest in firms developing a decentralised internet platform for apps (like Ethereum). Another option is to invest in firms attempting to make Blockchains safer and more stable (like Quantstamp).  

Each Blockchain ETF holder determines which firms will be included in its portfolio. Some may concentrate on Cryptocurrencies such as Bitcoin or Ethereum, while others may focus on venture capital businesses specialised in Cryptocurrency investments . On the other hand, others may focus on companies connected to software development tools and services.  

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Why Invest in Blockchain ETFs?

Investing in a Blockchain ETF is an excellent way to enter the Cryptocurrency market without the headache of purchasing, keeping, and selling individual Cryptocurrencies. 

1) All-in-one-solution 

Buying a Blockchain ETF allows you to invest in several Cryptocurrencies without buying each one separately. This is crucial for many investors who want more control over their investments but need more time or money to investigate every Cryptocurrency available. 

2) Simple Approach 

Blockchain ETFs expose investors to numerous Cryptocurrencies at once, rather than separately investing in one or two tokens.

3) Low Fees 

Blockchain ETFs usually carry relatively minimal fees compared to traditional investment vehicles like mutual funds or equities, making them appealing to those seeking more control over their assets

How to Invest in Blockchain ETFs?

Investing in Blockchain ETFs can be a strategic way to seek exposure to the Blockchain Technology sector without directly buying Cryptocurrencies. Here are detailed steps to help you get started:

1) Understand Blockchain ETFs

a) Blockchain ETFs are funds that invest in companies involved in Blockchain Technology, such as those developing blockchain applications or using blockchain in their operations.

b) There are various Blockchain ETFs, some focusing on technology companies, others on financial services, and some on a mix of industries.

2) Research Available ETFs

a) Look at the historical performance of different Blockchain ETFs to understand their returns over time.

b) Check the companies included in the ETF to guarantee they align with your investment goals.

c) Consider the cost of investing in the ETF, which is represented by the expense ratio. Lower expense ratios can lead to higher net returns.

3) Evaluate Your Investment Goals

a) Enhance your risk tolerance and determine the level of volatility you can comfortably manage in your investment portfolio.

b) Determine your investment timeline. Blockchain ETFs can be suitable for both short-term and long-term investments.

4) Choose a Brokerage Account

a) Open a brokerage account if you don’t already have one. Ensure the platform offers access to the Blockchain ETFs you are interested in.

b) Evaluate the fees and commissions charged by different brokerage platforms

5) Place Your Order

a) Choose between placing a market order (purchasing at the current price) or a limit order (purchasing at a specified price).

b) Determine how much money you want to invest in the Blockchain ETF

6) Monitor Your Investment

a) Keep track of your investment’s performance and make adjustments as needed based on market conditions and your financial goals.

b) Periodically rebalancing your portfolio to tackle your desired asset allocation.

7) Stay Informed

a) Stay updated on trends in the blockchain industry and how they might impact your investments.

b) Be aware of the regulatory changes that could affect Blockchain Technology and related investments.

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Cryptocurrency vs Blockchain ETFs 

Here are some major differences between Cryptocurrency and Blockchain ETFs: 

Conclusion

Blockchain ETFs invest in firms involved in the usage and development of Blockchain technology, as well as companies set to profit from the Future of Blockchain Technology. While the technology is new and most funds focusing on it have limited track records, investors who want to get in on the ground level may choose to add these funds to their portfolio.