Blockchain serves as the foundational technology behind cryptocurrencies such as bitcoin and Ethereum. However, its utility extends far beyond digital currencies, promising to transform any field reliant on secure and efficient database management.
For investors aiming to seize opportunities presented by this transformative technology, blockchain exchange-traded funds (ETFs) provide a convenient avenue. These ETFs enable investment in a diversified portfolio of companies actively pursuing blockchain-based solutions.
To assist in navigating this emerging investment landscape, Forbes Advisor has evaluated the current market offerings of blockchain ETFs, prioritizing those with substantial total assets under management (AUM).
The Best Blockchain ETFs of June 2024
| Amplify Transformational Data Sharing ETF (BLOK) | $625 million |
| Global X Blockchain ETF (BKCH) | $126 million |
| Bitwise Crypto Industry Innovators ETF (BITQ) | $114 million |
| VanEck Digital Transformation ETF (DAPP) | $98 million |
| Fidelity Crypto Industry and Digital Payments ETF (FDIG) | $85 million |
| Siren Nasdaq NexGen Economy ETF (BLCN) | $70 million |
| First Trust SkyBridge Crypto Industry and Digital Economy ETF (CRPT) | $48 million |
Methodology
Currently, the SEC has approved over 25 blockchain and bitcoin ETFs for trading in the United States. These ETFs cover a range of investments, including those in publicly-traded blockchain companies and bitcoin futures.
In our approach to identifying the top blockchain ETFs from this group, we followed these steps:
Firstly, we excluded ETFs focused on trading in bitcoin futures or spot bitcoin prices, concentrating instead on those targeting publicly-traded blockchain companies.
Next, we filtered the remaining ETFs to focus on those with total assets under management (AUM) exceeding $15 million at the time of assessment.
Following this process, we identified seven funds that met our criteria. It’s worth noting that there are additional blockchain ETF applications awaiting approval from the SEC. As the landscape of blockchain ETFs evolves, we aim to refine our methodology to select the most suitable options from an expanding array of similar funds.
What Is Blockchain Technology?
Blockchain serves as a digital ledger that records various types of data, primarily cryptocurrency transactions, though it can manage any form of information. This data is decentralized across a vast network of computer systems.
Every node within this network maintains identical copies of the digital ledger, a critical feature that enhances security and makes it challenging (though not impossible) to compromise or manipulate the system.
Understanding the term “blockchain” involves breaking down its components and operations:
Computers within the network encode data—whether it’s smart contracts, bitcoin transactions, or supply chain details for logistics firms—into “blocks.” These blocks are subsequently added to the continually expanding digital ledger, known as the “chain.” As new blocks of data are appended, all nodes update duplicate copies of the entire database.
Before new data can be added to the chain, all nodes must collectively validate its legitimacy. This verification process varies; for cryptocurrencies, it typically involves confirming that coins haven’t been double-spent, whereas in logistics, nodes might confirm or register the receipt and dispatch of shipments.
What Are Blockchain ETFs?
Blockchain ETFs are specialized exchange-traded funds that primarily invest in stocks of companies involved in using or developing blockchain technology. Unlike bitcoin ETFs or cryptocurrency ETFs, which focus narrowly on tracking the prices of individual digital currencies, blockchain ETFs typically offer a broader investment scope.
While cryptocurrencies such as bitcoin and Ethereum currently dominate blockchain applications, the technology has potential far beyond digital currencies. For example, Walmart’s Canadian division implemented blockchain to automate its invoice and payment management system for logistics partners.
The ETFs mentioned earlier invest across a wide spectrum of companies, broadly categorized as:
1. Companies holding significant amounts of cryptocurrency on their balance sheets, such as MicroStrategy and Tesla.
2. Entities involved in cryptocurrency exchanges and mining operations. Coinbase represents a prominent example of a cryptocurrency exchange, while Marathon Digital focuses on bitcoin mining.
3. Financial services firms like Galaxy Digital Holdings, which specialize in managing crypto assets that derive their value from blockchain technology.
4. Technology companies like NVIDIA Corp, which provide essential hardware supporting blockchain systems through their microchip manufacturing.
