There are hundreds of cryptocurrencies out there. Many use the blockchain in different ways. Blockchain ETFs can help you get exposure to different cryptocurrencies and blockchain applications without buying hundreds of different coins. Though most people are likely most familiar with the blockchain through cryptocurrencies such as Bitcoin and Ethereum, there are other potential applications for the technology. Some investors want to invest in the blockchain without buying cryptocurrencies or want to get exposure to companies involved in developing blockchain technology. We built this list of blockchain ETFs, presented in no particular order, based on a few factors, including liquidity, historical returns, and investment fees. It is one of the older funds on this list despite being just 4 years old. The newness of blockchain technology means that most ETFs focused on the space are quite young. This history may help investors feel more confident about the fund’s future. The fund’s nearly $152 million in assets also makes it one of the larger funds on our list, which means investors should have little trouble buying and selling shares. The fund charges 0.65%, equivalent to $6.50 for each $1,000 invested.
Global X Blockchain ETF (BKCH)
Return since inception (as of Dec. 31, 2021): -8.87%Expense ratio: 0.50%Assets under management (AUM as of Feb. 23, 2022): $95.89 millionInception date: July 12, 2021
The Global X Blockchain ETF is another fund that invests in a variety of companies across multiple industries. The unifying theme of the fund is that it invests in businesses that can benefit from blockchain technology, digital transactions, and the integration of digital assets into the blockchain. With almost $96 million under management as of Feb. 23, 2022, investors should be able to buy and sell shares relatively easily. The fund is also the cheapest on our list with an expense ratio of 0.50%, equivalent to $5 for every $1,000 invested. The fund is less than a year old, so it does not have a long track record, but that is true for many of the funds on our list. Blockchain technology is quite new, so most funds focusing on the area are quite new. Its top holdings, as of Feb. 23, 2022, include Coinbase, Riot Blockchain, and Marathon Digital.
Amplify Transformational Data Sharing ETF (BLOK)
3-year return (as of Dec. 31, 2021): 47.34%Expense ratio: 0.71%Assets under management (AUM as of Feb. 23, 2022): $912 millionInception date: Jan. 17, 2018
The Amplify Transformational Data Sharing ETF is another fund that focuses on companies developing or using blockchain technology. 80% of the fund’s assets are invested in those businesses with the remainder invested in companies that are likely to benefit from future blockchain advancements. Its top holdings as of Feb. 23, 2022, include SBI Holdings, CME Group, and Nvidia. What sets the fund apart from the competition is that it is the largest blockchain fund by far, with $912 million in assets as of Feb. 23, 2022. That means that liquidity won’t be an issue for investors looking to buy and sell shares. The fund is one of the more expensive options with an expense ratio of 0.71%, equivalent to $7.10 for every $1,000 invested. However, this isn’t significantly more expensive than other blockchain ETFs.
Viridi Cleaner Energy Crypto Mining & Semiconductor ETF (RIGZ)
Return since inception (as of Dec. 31, 2021): 2.22%Expense ratio: 0.90%Assets under management (AUM as of Jan. 5, 2022): $10.09 millionInception date: July 20, 2021
The Viridi Cleaner Energy Crypto-Mining & Semiconductor ETF is a fund that is primarily focused on cryptocurrency mining rather than businesses involved in transactions or developing the technology. This means that the fund invests in mining businesses and companies that develop technology used by cryptocurrency miners. One major criticism of cryptocurrency and blockchain technology is that it is damaging for the environment. This fund invests some of its assets in companies developing clean energy solutions that can reduce the energy consumption of the blockchain and reduce its environmental impact. The fund is relatively new at less than 1 year old and has just $10.09 million under management, which may create liquidity issues for investors looking to buy and sell shares. It’s also the most expensive on our list with an expense ratio of 0.90%, equal to $9 for every $1,000 invested. However, it offers a different take on blockchain investing that some investors may appreciate. Its top holdings, as of Feb. 23, 2022, include Core Scientific Inc., Marathon Digital, and BitFarms Canada.
Pros and Cons of Investing in Blockchain
Pros Explained
New technology that has seen significant growth: The blockchain is young, with Bitcoin first appearing in 2009. Despite it being around for a bit more than a decade, cryptocurrency and the blockchain have grown, with tokens like Bitcoin exceeding $65,000 in value at some times. More companies are adopting blockchain technology: Many companies, even those outside of the world of tech, have started to adopt some blockchain technologies, such as accepting cryptocurrency payments. For example, PayPal allows users to buy and sell cryptocurrencies, and the movieplex chain AMC accepts cryptocurrency payments for tickets. ETFs are an easier way to invest than buying crypto or NFTs: Buying cryptocurrency or NFTs is one way to get exposure to the blockchain. However, you may need dedicated accounts to buy cryptocurrencies and it can require some technical knowledge. You can use your existing brokerage account to invest in these ETFs, making it easier to get exposure to the space.
Cons Explained
Blockchain technology is controversial due to its environmental impact: Many blockchains are very energy-hungry, meaning they can have a negative impact on the environment. This may lead to them falling out of favor or regulations to restrict them, reducing their value. Most ETFs in the space are young with unproven track records: The funds on this list are less than 5 years old with many having been established less than a year ago. Blockchain technology is new, but these short histories mean that blockchain ETFs haven’t had much time to prove that they can sustain themselves and produce long-term returns. Cryptocurrency, and therefore related stocks, may be volatile: Cryptocurrencies are notoriously volatile. That price volatility can impact many companies involved in the blockchain, especially those closely-tied to cryptocurrency values, such as mining businesses. ETFs may not invest purely in blockchain companies: There are only a few pure play blockchain companies. With growing applications of blockchain technology, many companies are looking to leverage that technology even though it’s not core to their business. Blockchain ETFs may invest in such companies, perhaps creating an overlap if those companies are already a part of the investor’s portfolio through another ETF.
Historical Performance Trends
Blockchain technology is new and these funds are fewer than 5 years old. Many are less than 1 year old, so it is hard to track the history of blockchain technology investments.
Amplify Transformational Data Sharing ETF, the oldest and the largest blockchain ETF, has delivered robust annualized returns over the 1-year and 3-year period, as of Dec. 31, 2021. However, due to extreme volatility in the cryptocurrency markets, most blockchain ETFs suffered from negative returns in the 3 months ending Jan. 31, 2022.
Is a Blockchain ETF Right for Me?
Blockchain technology is one of the newest and most talked about technologies out there. Many investors are excited to get involved, but many ways of investing, like directly buying cryptocurrencies can be complex and require tech-savvy. Blockchain ETFs are new and largely unproven, but give investors an easier way to get exposure to the space. If you don’t mind the risk and volatility of investing in new ETFs focused on a new technology, blockchain ETFs might be a good fit for you. One thing to keep in mind is the holdings for blockchain ETFs. Many funds also invest in a lot of companies across different sectors where the core business has a tangential relationship with blockchain technology. If those companies are already a part of your portfolio as stocks or as part of other ETFs, it may not be a great idea to invest in them again through a blockchain ETF.
The Bottom Line
Blockchain ETFs invest in companies that are involved in the use and development of the blockchain, as well as companies poised to profit from future adoption of blockchain technology. While the technology is still young and most funds focused on it have short track records, investors who want to get in on the ground floor may want to add these funds to their portfolio. The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.
