Fancy a bet on blockchain technology with an ETF (Exchange-Traded Fund)? It looks as if this is already possible.
The downside: you will have to invest real (fiat) money. Bitcoins or ETHs or other cryptocurrencies won’t do.
Blockchain ETFs explored
If you examine some of the ETFs, the holdings are stuffed with ‘traditional’ tech companies. Think:
- Taiwan Semiconductor
- amongst others.
The reason: most everybody, including these companies is unsure how they will exploit blockchain in a significant, revenue or opportunity contributing way. Or, to put it another way, blockchain ETFs are little more than investment gimmicks so that punters with a probable loss wish can bet on the companies expected to profit from blockchain technology.
There appear to be four major blockchain ETFs (today – more will probably show up) to assess:
- BLOK (with holdings in Digital Garage, GMO Internet, IBM, Intel, NVIDIA, Red Hat and Overstock)
- BLCN (with holdings in Cisco, Hitachi, IBM, Intel, Microsoft and SAP plus Nasdaq Inc., Accenture, Barclays and SBI)
- LEGR (with holdings in Accenture, Alibaba Group, ASUSTeK, Gemalto, IBM, Intel, Nordic Semiconductor, SAP and Taiwan Semiconductor); LEGR also tracks the Indxx Blockchain Index
- KOIN (with holdings in Amazon, BP, Cisco, Intel, Mastercard, Microsoft, Oracle, Taiwan Semiconductor, and Tencent Holdings); KOIN also tracks the tracks the Innovation Labs Blockchain Innovators Index.
None of these ETFs has a trading history starting before 2018. That means not much data, on performance of quality or management and stock picking. Worse still, these blockchain ETFs are expensive. Buyers will pay an average of 0.66% (or the invested principle) each year when normal ETFs can be way less than this. For example most European ETFs cost from 0.2 to 0.5% 0.5% per annum.
According to the data, BLOK and BLCN together manage about half the assets in blockchain ETFs. BLOK prefers tech investments. BLCN prefers financial organisations (like banks – which are known to be investing in blockchain).
Enterprise Times: what does this mean
If you have money to spread around these ETFs look like another financially sophisticated way to hand over your riches. The spread of companies is incredible – from Accenture (services) to BP (petroleum), to online sales (Amazon and Alibaba) before you reach the traditional tech companies like Cisco, Intel, IBM, Microsoft and Oracle.
Yes, all are involved in blockchain. But none obtain significant revenues from blockchain activities – though any ‘might’ in the future. The Enterprise Times take is that these blockchain ETFs represent yet another case of using blockchain attractions to gild the tech lily, with no reason to think the gains will be any better and with an annual cost penalty to pay for the privilege. Caveat emptor.