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Blockchain exchange-traded funds (ETFs) own stocks in companies that have business operations in blockchain technology or profit from it in some way. Blockchain is made up of complex blocks of digital information and is increasingly used in banking, investing, cryptocurrency, and other sectors.
While blockchain is a relatively new technology, many of the companies that operate in the space are well established. Some examples include International Business Machines Corp. (IBM), Oracle Corp. (ORCL), and Visa Inc. (V).
Many investors may be wary of risking an investment in blockchain due to the technology’s association with the volatile cryptocurrency market. However, blockchain is not the same thing as cryptocurrency, and blockchain ETFs invest only in stocks of regulated companies, many of which are big blue-chip technology firms and not directly in cryptocurrency.
Key Takeaways
- The broader information technology sector and three blockchain ETFs below outperformed the market over the past year.
- These three ETFs, ranked by one-year trailing total return, are BLOK, BLCN, and LEGR.
- The top holdings of these ETFs are Galaxy Digital Holdings Ltd., class A shares of Bakkt Holdings Inc., and Advanced Micro Devices Inc., respectively.
Three blockchain ETFs trade in the United States, excluding inverse and leveraged ETFs as well as funds with less than $50 million in assets under management (AUM). This list excludes the Bitwise Crypto Industry Innovators ETF (BITQ), the VanEck Digital Transformation ETF (DAPP), and the Global X Blockchain ETF (BKCH), all of which launched within the past year and do not have enough trading history to be included in our rankings.
While there is no benchmark index for the blockchain industry, the broader tech sector is a reasonable reference point. The S&P 500 Information Technology Sector Index has outperformed the broader market in the past year, providing 1-year trailing total returns of 37.4% compared with 32.1% for the S&P 500 as of Nov. 11, 2021. The best-performing blockchain ETF for Q1 2022, based on performance over the past year, is the Amplify Transformational Data Sharing ETF (BLOK). We examine the three blockchain ETFs below. All numbers below are as of Nov. 12, 2021.
- Performance Over One-Year: 138.5%
- Expense Ratio: 0.71%
- Annual Dividend Yield: 1.09%
- Three-Month Average Daily Volume: 475,561
- Assets Under Management: $1.6 billion
- Inception Date: Jan. 16, 2018
- Issuer: Amplify Investments
BLOK is an actively managed ETF that invests a minimum of 80% of its net assets in stocks of companies engaged in the development and utilization of blockchain technologies. It follows a blended strategy, investing in a mix of value and growth stocks of various market capitalizations around the world, and is composed mostly of companies operating within the software, IT services, and capital markets industries.
The fund’s top three holdings are Galaxy Digital Holdings Ltd. (GLXY:TSE), a Canada-based financial services and investment management company focused on cryptocurrency and blockchain; class A shares of Silvergate Capital Corp. (SI), the holding company for a bank serving the digital currency industry; and class A shares of Coinbase Global Inc. (COIN), the operator of a cryptocurrency exchange platform.
- Performance Over One-Year: 43.8%
- Expense Ratio: 0.68%
- Annual Dividend Yield: 0.61%
- Three-Month Average Daily Volume: 40,662
- Assets Under Management: $313.9 million
- Inception Date: Jan. 17, 2018
- Issuer: SRN Advisors
BLCN tracks the Nasdaq Blockchain Economy Index, which gauges the performance of companies involved in developing, researching, supporting, innovating, or utilizing blockchain technology. The ETF follows a blended strategy, investing in growth and value stocks. BLCN’s top three holdings are class A shares of Bakkt Holdings Inc. (BKKT), the operator of a digital asset marketplace; class A shares of Silvergate Capital Corp.; and Marathon Digital Holdings Inc. (MARA), a digital asset technology company that mines cryptocurrencies.
- Performance Over One-Year: 33.0%
- Expense Ratio: 0.65%
- Annual Dividend Yield: 1.26%
- Three-Month Average Daily Volume: 20,136
- Assets Under Management: $141.0 million
- Inception Date: Jan. 24, 2018
- Issuer: First Trust
LEGR tracks the Indxx Blockchain Index, which gauges the performance of companies that actively utilize, invest in, develop, or have products that are positioned to benefit from blockchain technology. The ETF normally invests a minimum of 90% of its net assets in equity securities that comprise the index and has a total of 101 holdings, excluding cash, most of which operate in the financial and information technology industries.
LEGR’s top three holdings include Advanced Micro Devices Inc. (AMD), a semiconductor manufacturer; NVIDIA Corp. (NVDA), a graphics processing unit manufacturer; and salesforce.com Inc. (CRM), a cloud-based customer relationship management software company.
The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.
