The most straightforward way to invest in a blockchain is to buy the associated cryptocurrency. Every time you purchase Bitcoin or Ether, you are making an investment in the underlying blockchain.
The problem with direct investing is that many users remain skeptical about the blockchain market. They worry they don’t understand the technology well enough to make a good investment or that their self-directed purchases could lose money. They read horror stories about scams and software bugs that lead others to big losses.
Still, they see the awesome year-over-year performance of the cryptocurrency market and they want a share of those profits.
That desire has led to the development of financial instruments that allow investment in the blockchain market without actually purchasing cryptocurrency. The most widespread solution is the exchange-traded fund.
Analysts at the brokerage house identify publicly traded companies that are pursuing business in the blockchain sector. For example, IBM offers guidance to clients about building and using private blockchains. IBM isn’t just a blockchain stock, but the company is a player in the blockchain market, so it goes on the list. Oracle, and Visa are known to be investing in blockchain research, so analysts identify them as blockchain companies.
A blockchain ETF might therefore include shares of these three companies – and perhaps dozens more blockchain technology companies – because the companies’ financial performance is related to the success of their blockchain ventures. The fund is therefore an indirect way of investing in the overall blockchain market. Investing in the fund is like purchasing a little bit of each of the component companies. Fund managers pick the best blockchain stocks and add them to the funds.
Among the first blockchain ETFs are Amplify’s Transformational Data Sharing ETF (BLOK), SRN Advisors’ Siren Nasdaq NexGen Economy ETF (BLCN), and First Trust’s Indxx Innovative Transaction & Process ETF (LEGR). These funds range in size from 120 million euros under management to 1.5 billion euros.
Those American funds are matched by a full complement of ETFs that are traded in Europe.
In Germany, ETC Group has issued funds for Bitcoin, Ethereum, Litecoin, Bitcoin Cash, Solana, Cardano, Stellar, Polkadot, and Tezos. Iconic Funds offers a Bitcoin ETF as well.
In Jersey, Wisdom Tree offers funds for Bitcoin, Ethereum, crypto altcoins, crypto mega cap, and the crypto market. CoinShares has introduced funds for Bitcoin and Ethereum.
In Liechtenstein, investors can purchase ETFs associated with Bitcoin, Ethereum, Tron, Solana, and Polkadot through VanEck. Iconic offers an Ethereum ETF.
Switzerland’s 21Shares has introduced ETFs for Ethereum, Bitcoin, Solana, Polkadot, Cardano, Tezos, Bitcoin Cash, and Stellar, plus a crypto index fund.
As these funds grow more popular, additional funds are likely to be launched in other countries.
Stock exchanges are highly regulated, and these funds all pass regulatory costs along to investors. But they represent a viable way for nervous investors who wonder how to invest in blockchain technology without buying crypto. Blockchain technology stocks let them dip a first tentative toe into the ocean of blockchain investing.
NOTE
This text is informative in nature and should not be considered an investment recommendation. It does not express the personal opinion of the author or service. Any investment or trading is risky, and past returns are not a guarantee of future returns. Risk only assets that you are willing to lose.
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