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Blockchain technology was brought into the world by the same man who gave us Bitcoin: Satoshi Nakamoto. And while his cryptocurrency is at center stage, its underlying technology maybe even more exciting.
Blockchain ETFs make it easy for investors to get exposure to the broader crypto industry and the technology that is redefining the way humans tracts and send/receive money.
Blockchain’s potential applications extend far beyond cryptocurrencies, such as powering digital IDs, guaranteeing copyright and royalty protection, ensuring food safety, and verifying wills and inheritances.
What is Blockchain?
Blockchain is a public ledger technology for transactional applications that establish trust, accountability, and transparency. It is a specific kind of database that stores information in “blocks” that get chained together.
Blockchain technology can record transactions between two parties efficiently and in a verifiable and immutable way.
Bitcoin employs a “decentralized” version of blockchain that puts the network users in charge instead of a central authority. This means that Bitcoin’s network is powered by many different computers, nodes, and not vulnerable to a single point of failure.
Its decentralized feature makes Bitcoin’s transaction history irreversible because the network does not run on a single computer. The nodes that power the network agree that a transaction is accurate and that information is copied to on each node.
The nodes can cross-reference each other to detect an incorrect transaction on the network, such as double-spending, and pinpoint the exact node with the false data.
However, not all blockchains are decentralized like Bitcoin’s and private, centralized versions exist and can function under a single roof. Without further ado, here are the best blockchain ETFs to invest in.
Learn More: Best Cryptocurrency Exchanges
Best Blockchain ETFs to Invest In
#1. Amplify Transformational Data Sharing ETF (BLOK)
- Total Returns YTD: 89%
- Expense Ratio: 0.70%
- Annual Dividend Yield: 1.89%
- Average Daily Volume: $7.01M
- Assets Under management: $353.70M
- Inception Date: January 16, 2018
- Issuer: Amplify
- Category: Large Cap Blend Equities
- Number of Holdings: 52
BLOK is an actively managed exchange traded fund that invests at least 80% of its net assets in equity securities of companies involved in developing and utilizing blockchain technologies.
BLOK invests in companies advancing “transformational data sharing technologies” or profitably deploying such technologies. Additionally, the ETF has exposure to firms who have partnered with or invested in blockchain technology.
BLOK’s top five holdings include Silvergate Capital, Microstrategy, Square, Galaxy Digital Holdings, and PayPal.
#2. Siren Nasdaq NextGen Economy ETF (BLCN)
- Total Returns YTD: 58%
- Expense Ratio: 0.68%
- Annual Dividend Yield: 0.77%
- Average Daily Volume: $2.82M
- Assets Under Management: $184.03M
- Inception Date: January 7, 2020
- Issuer: Siren
- Category: Large Cap Blend Equities
- Number of Holdings: 73
BLCN seeks long-term growth by tracking the investment returns of Siren Nasdaq’s Blockchain Economy Index.
Siren and Nasdaq partnered to create an index to measure companies’ returns that are committing material resources to develop, research, support, innovate, or utilize blockchain technology for their use or for use by others.
BLCN’s top five holdings are Galaxy Digital Holdings, Canaan Inc, Baidu Inc, Square Inc, and Samsung Electronics.
#3. Capital Link NextGen Protocol ETF (KOIN)
- Total Returns YTD: 32.72%
- Expense Ratio: 0.95%
- Annual Dividend Yield: 0.41%
- Average Daily Volume: $406.36K
- Assets Under management: $20.35M
- Inception Date: January 30, 2018
- Issuer: Exchange Traded Concepts ETF
- Category: Technology Equities
- Number of Holdings: 45
KOIN tracks an index that uses artificial intelligence to select global stocks with a current or future economic interest in blockchain technology.
The index’s proprietary algorithm scans large amounts of textual data from online media platforms and databases.
These companies are then separated into four categories: cryptocurrencies payees, mining enablers, solution providers, and cryptocurrency users.
Each of these categories is allowed up to 15 holdings in the ETF. Each category capped at a total allocation of 40% and individual companies maxed at 7% of the fund.
As you can see, this ETF is more of a pure crypto play than the other blockchain ETFs, but its top holdings have some familiar names.
KOIN’s top five holdings are NVIDIA Corp, Taiwan Semiconductor Manufacturing, PayPal Holdings, Microsoft, and Amazon.com.
This is because the top technology companies, like Microsoft and Amazon, have shown just enough interest in blockchain to get picked up by the index’s algorithm.
#4. First Trust Indxx Innovative Transaction & Process ETF (LEGR)
- Total Returns YTD: 19.29%
- Expense Ratio: 0.65%
- Annual Dividend Yield: 0.94%
- Average Daily Volume: $309.64K
- Assets Under management: $54.10M
- Inception Date: January 24, 2018
- Issuer: First Trust
- Category: Large Cap Blend Equities
- Number of Holdings: 100
LEGR is one of the best blockchain ETFs. It tracks an index of global equities based on their exposure to developing or usage of blockchain technology.
LEGR categorizes these companies similarly to KOIN but uses a tiered index weighting methodology. Firms are separated into three fields of blockchain infrastructure:
- Active Enablers – firms developing blockchain tech, products, or services for internal use or sale
- Active Users – firms using blockchain technology offered by an Active Enabler
- Active Explorer – firms that have announced their intention to incorporate blockchain into their business
The fund’s top five holdings are Baidu Inc, “Equity Other,” Micron Technology Inc, Xilinx Inc, and A.P. Moller – Maersk A/S Class B.
Blockchain ETFs FAQs
What is the Best Blockchain ETF?
BLOK has been the best performing blockchain ETF in recent years and has the highest assets under management by more than double the next competitor. Its top holding Silvergate Capital owns one of the most innovative banks in fintech and cryptocurrency.
Additionally, the ETF has benefited from its large allocation to Square Inc, one of the best-performing stocks of 2020.
However, BLCN is focused on blockchain’s long-term growth and may still be undervalued.
Related: How to Buy Bitcoin
Are there any Cryptocurrency ETFs?
You will not find any publicly traded ETFs that track specific cryptocurrencies, but you can invest in companies that build crypto solutions or infrastructure.
For example, Marathon Patent Group (MARA) is one of the first Nasdaq-listed cryptocurrency mining companies. It is a digital asset technology company which develops blockchain technology and generates digital assets.
Learn More: How to Invest in Cryptocurrencies
What is the Best Way to Invest in Blockchain Technology?
There are companies like Riot Blockchain (RIOT) that strictly focus on developing blockchain technology. Then there are companies with blockchain divisions, such as IBM and DocuSign.
There are also nano-cap companies in the blockchain space, such as Hive Blockchain Technologies. Choosing a single company may be riskier, but you’ll be rewarded with the potential for a higher upside. RIOT was up more than 1,500% in 2020.
The best way to invest in blockchain technology ultimately comes down to each investor’s risk tolerance and investment goals.
We recommend diversifying into the highly competitive space by choosing an ETF such as BLOK, BLCN, KOIN, or LEGR. While the expense ratios are higher for this kind of niche exposure, you will be rewarded nonetheless by the inevitable adoption of blockchain.
Can I buy a Bitcoin ETF?
Technically, no. But there is an indirect way to get exposure to Bitcoin in traditional financial markets by owning the Grayscale Bitcoin Trust.
This fund pools investors’ money and buys bitcoin. It is serving as a placeholder until the SEC approves a bitcoin-based ETF.
Related: Is Cryptocurrency Safe?
Can You Buy Blockchain Stock?
Several companies only develop blockchain technology and would be considered pure blockchain investments. Although some of these companies are penny stocks and come with great risk.
There are established companies such as Intel Corp. and IBM that are making significant leaps in blockchain tech.
Is there a Blockchain Stock or ETF?
There are publicly traded companies that advance blockchain technology, but there is no single “blockchain stock.” Remember, there are different kinds of blockchains, and they can serve in many various applications.
Some ETFs track blockchain companies, like BLOK, BLCN, KOIN, and LEGR that get investors exposure to the growing blockchain industry.
Learn More: Is Bitcoin a Good Investment?
Bottom Line: Best Blockchain ETFs
The best blockchain ETFs provide easy access to investors to invest in the broader crypto industry and blockchain technology.
As such a new development, blockchain will continue to redefine the way humans transact and exchange goods. This single development gives power to the consumer and safeguards privacy.