Blockchain technology has gained tremendous popularity over the past few years. While cryptocurrencies like Bitcoin were the initial applications of Blockchain, now Blockchain is being applied to various industries to bring more efficiency using distributed ledger technologies. This demand created an influx of investment in this, and companies are opting for blockchain app development services to bring new and emerging solutions. With increased institutional interest in Blockchain, exchange-traded funds (ETFs) focusing on blockchain, and related companies have also emerged. These blockchain ETFs are different from crypto ETFs, which were just recently approved.
In this guide, we will discuss what Blockchain ETFs are and why you need to invest in 2024. We will also explain how to choose and invest in the best blockchain ETFs.
What are blockchain ETFs?
Blockchain ETFs are funds that track the performance of companies involved in developing and using blockchain technology. They allow investors to gain exposure to the broader blockchain industry without directly investing in individual blockchain stocks. Blockchain ETFs hold a basket of stocks of companies involved in blockchain development, mining, infrastructure, etc., or significant revenue exposure to Blockchain and crypto technology.
Why are Blockchain ETFs worth investing in in 2024?
Blockchain is a technology that’s gaining popularity in different industries like healthcare and finance. Blockchain ETFs can be a good option if you want to invest in this area. By 2024, the industry is expected to grow even more due to factors like institutional adoption, innovative ideas, and new applications. According to Coingraph, some of the best blockchain ETFs returned over 100% in 2023, bringing new opportunities for investors.
This is a good time for investors to take advantage of Blockchain’s potential. The risks are also reduced because of increasing regulatory clarity. If you invest in blockchain ETFs, you can diversify your portfolio, which is better than investing in individual stocks as it mitigates the risks.
Blockchain ETFs vs Bitcoin ETFs (Crypto ETFs)
They may look similar but there are some fundamental differences between blockchain ETFs and Bitcoin ETFs. Here is a summary of it.
| Feature | Blockchain ETFs | Bitcoin ETFs |
|---|---|---|
| Underlying Asset | Basket of companies involved in blockchain technology | Bitcoin cryptocurrency itself |
| Exposure | Diversified across various industries utilizing blockchain (e.g., finance, healthcare, supply chain) | Direct exposure to Bitcoin's price movements |
| Investment type | Equity (stocks) | Cryptocurrency |
| Volatility | Generally lower due to diversification | High volatility mirroring Bitcoin's price swings |
| Regulation | More readily available due to investment in regulated companies | Currently, only Bitcoin futures ETFs exist in the US, lacking direct Bitcoin exposure |
| Fees | Management fees associated with the ETF | May involve additional fees for trading on crypto exchanges |
| Investment platform | Traditional stock exchanges (e.g., NYSE, NASDAQ) | Cryptocurrency exchanges or futures markets |
| Suitability | Investors seeking broader exposure to blockchain potential | Investors specifically targeting Bitcoin's price movements |
How do blockchain ETFs work?
Most blockchain ETFs invest in a group of stocks that meet certain criteria related to their involvement in blockchain technology. ETFs offer a range of benefits, such as diversification, a regulated structure, and the ability to buy or sell easily on exchanges. ETFs usually track an index using a full replication or optimized sampling approach. This makes them an attractive investment option for those seeking exposure to the blockchain market. According to this Forbes article, the best blockchain ETFs are much safer investments than bitcoin ETFS as we are investing in a company rather than a fluctuating crypto exchange.
How to invest in blockchain ETF in 2024?
Before investing in Blockchain, it’s important to understand the basics of how it works, what it’s used for, and its impact on different industries. Determine your investment goals, whether you want long-term growth, diversification, or exposure to particular parts of the blockchain industry like cryptocurrencies or the metaverse. Choose a reputable and regulated platform to open a brokerage account that offers access to various ETFs.
Check if the platform provides the necessary tools for research and analysis. Find Blockchain ETFs that align with your investment goals. Consider factors such as investment strategy, underlying assets, historical performance, and expense ratios. ETFs operate differently than traditional mutual funds. They are traded on stock exchanges like individual stocks and aim to replicate the performance of an underlying index.
Consider if you want to invest in a specific niche within Blockchain, like cryptocurrencies, or prefer a more diversified approach. Diversification can help manage risk by spreading investments across various assets. Compare the expense ratios of different Blockchain ETFs. Lower expense ratios can contribute to higher returns over the long term. Evaluate the historical performance of the ETFs you’re considering. Look at how they performed during different market conditions to assess their resilience and consistency.
How to choose the right Blockchain ETF to invest in 2024?
With multiple options available, here are some factors to consider while selecting a blockchain ETF,
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Investment Objective
Clearly define your investment objective. If you seek exposure to specific sectors like cryptocurrencies or the metaverse, choose an ETF that aligns with your focus. Alternatively, opt for a broader blockchain ETF for diversified exposure.
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Underlying Strategy
Assess your risk appetite to decide between spot and futures-based ETFs. Spot ETFs invest in physical assets, providing more stability, while futures-based ETFs involve contracts and can be more volatile. Diversified basket ETFs, combining various strategies, can offer a balanced approach.
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Performance Track Record
Look for ETFs with a proven track record over time. Analyze their historical performance during different market conditions to gauge their resilience and ability to deliver consistent returns.
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Costs
Evaluate the expense ratios associated with each ETF. Some blockchain ETFs may have higher fees compared to traditional ones. Consider the impact of these costs on your overall returns and choose a fund that aligns with your budget.
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Fund Size
Consider the size of the ETF. Larger funds often have higher liquidity and trading volumes, making buying and selling shares easier for investors. This liquidity can be crucial, especially during volatile market conditions.
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Index Tracked
Understand the index that the ETF tracks and the methodology behind it. Different indices may have distinct criteria for selecting and weighing assets. Ensure that the index aligns with your investment goals and provides the exposure you are seeking.
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Regulatory Environment
Given the evolving regulatory landscape in the blockchain and cryptocurrency space, ensure that the ETF complies with relevant regulations. A well-regulated fund may offer a level of investor protection and adherence to industry standards.
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Market Trends and Innovation
Consider how adaptable the ETF is to emerging market trends and technological innovations within the blockchain space. A fund that actively adjusts its holdings to align with the evolving landscape may offer better long-term prospects.
Top blockchain ETFs to invest 2024
1. VanEck Crypto and Blockchain Innovators UCITS ETF
This ETF invests in a basket of companies that are developing and using blockchain technology. It is a good option for investors who want to gain exposure to the entire blockchain industry.
2. Amplify Transformational Data Sharing ETF (BLOK)
This ETF invests in a basket of companies that are involved in the sharing and monetization of data. Blockchain technology can be used to securely and transparently share data, so this ETF is a good way to gain exposure to the potential of Blockchain in the data economy.
3. Global X Blockchain UCITS ETF USD Accumulating
This ETF invests in a basket of companies involved in developing and adopting blockchain technology. It is a good option for investors wanting to gain global blockchain market exposure.
4. Shares Blockchain Technology UCITS ETF USD (Acc)
This ETF invests in a basket of companies involved in developing and adopting blockchain technology. It is a good option for investors wanting to gain exposure to the European blockchain market.
5. Siren Nasdaq NexGen Economy ETF (BLCN)
This ETF invests in a basket of companies that are developing and using emerging technologies, including Blockchain. It is a good option for investors who want to gain exposure to the potential of disruptive technologies.
Conclusion
Blockchain technology is expected to change many industries in the future. As blockchain adoption and related businesses grow, blockchain-focused ETFs can help investors gain diversified exposure to this emerging space. By understanding how these funds work and choosing the right ones that align with your goals, ETFs can be a great long-term investment option for playing the blockchain market in 2024. In this blog, we have provided detailed information about blockchain ETFs, how they work, and how to invest. We have also listed some of the top blockchain ETFs to invest in this year.
Blockchain ETFs bring a whole new opportunity for investors but also the ripe time for businesses to invest in blockchain development. According to Grand View Research, the blockchain technology market size was valued at USD 17.46 billion in 2023.
Vrinsoft Technology is a leading blockchain app development company with a demonstrated history of successful blockchain implementation. We have worked with a wide range of industries and developed blockchain apps that are leading the way in emerging markets. Consult with us today and invest in blockchain development for the future.
FAQs
What are blockchain ETFs and how do they work?
Blockchain ETFs are a way to invest in the growing blockchain industry without directly holding cryptocurrencies. They invest in a group of companies that are actively developing and using blockchain technology. This helps diversify your investment and gives exposure to multiple players in the blockchain ecosystem. It also helps you keep up with the latest technological advancements.
How do I get started investing in blockchain ETFs?
To start investing in blockchain ETFs, you need to open a brokerage account that allows you to buy ETFs. Do your research to understand the different blockchain ETFs available and their associated fees. Choose an ETF that aligns with your investment goals and risk tolerance. Once you find a suitable option, order through your brokerage platform.
Are bitcoin ETFs the same as blockchain ETFs?
Investors need to understand the difference between Bitcoin ETFs and blockchain ETFs. Bitcoin ETFs track the price fluctuations of Bitcoin, while blockchain ETFs focus on companies that use blockchain technology, not the currency. The choice between them depends on your investment goals: direct exposure to Bitcoin or broader participation in the potential of the blockchain industry.
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