Best Blockchain ETFs for Q4 2022

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Best Blockchain ETFs for Q4 2022

Blockchain exchange-traded funds (ETFs) invest in firms that use blockchain technology or benefit from it in some manner. Blockchain, which is made up of complicated chunks of digital information, is rapidly being utilized in banking, investing, cryptocurrencies, and other industries.

Despite the fact that blockchain is a relatively new technology, many of the firms involved are well-established. International Business Machines Corp. (IBM), Oracle Corp. (ORCL), and Visa Inc. are a few examples (V).

Many investors may be hesitant to invest in blockchain owing to its affiliation with the unpredictable cryptocurrency market. However, blockchain is not synonymous with cryptocurrencies, and blockchain ETFs only invest in equities of regulated businesses, many of which are large blue-chip technology enterprises with no direct participation in cryptocurrency.

Key Takeaways

  • Over the previous year, the larger information technology (IT) sector beat the market, while all three blockchain ETFs on our list underperformed.
  • LEGR, BLCN, and BLOK are the top blockchain ETFs in terms of one-year trailing total return.
  • These ETFs’ top holdings are sponsored ADRs of ICICI Bank Ltd., Marathon Digital Holdings Inc., and MicroStrategy Inc. Class A shares, in that order.

In the United States, five blockchain ETFs are traded, omitting inverse and leveraged ETFs as well as funds with less than $50 million in assets under management (AUM).This ranking excludes the Bitwise Crypto Industry Innovators ETF (BITQ) and the Global X Blockchain ETF (BKCH), both of which debuted in 2021 and have yet to match the performance of our top three funds. 1

Although there is no benchmark index for the blockchain business, the larger technology sector is a good place to start. In the previous year, the S&P 500 Information Technology Sector Index outperformed the wider market, with one-year trailing total returns of -1.8%, compared to -2.6% for the S&P 500 as of Aug. 12, 2022. 2 It is worth noting that all three blockchain ETFs listed below underperformed the wider market during that time period. The First Trust Indxx Innovative Transaction & Process ETF has been the best-performing blockchain ETF over the last year (LEGR).Below, we look at the top three blockchain ETFs. All figures are as of August 12, 2022. 1

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First Trust Indxx Innovative Transaction & Process ETF (LEGR)

  • Over a year, performance was -13.5%.
  • Expense Ratio: 0.65%
  • Annual Dividend Yield: 1.26%
  • Average daily volume over three months: 12,755
  • $123.0 million in assets under management
  • Inception Date: Jan. 24, 2018
  • Issuer: First Trust

LEGR is linked to the Indxx Blockchain Index. The benchmark measures the performance of firms that use, invest in, or create blockchain technology, or that have products that are positioned to profit from it. The ETF typically invests at least 90% of its net assets in the index’s equity securities. Financials account for over 37% of the portfolio, followed by information technology (IT) and consumer discretionary companies. 3

Sponsored ADRs of ICICI Bank Ltd. (IBN), an India-based bank and financial services company; Deutsche Telekom AG (DTE:ETR), a Germany-based telecommunications and information technology services firm; and Class A shares of Mastercard Inc. (MA), a financial services corporation, are LEGR’s top three holdings. 4

Siren Nasdaq NexGen Economy ETF (BLCN)

  • Over a year, performance was -35.7%.
  • Expense Ratio: 0.68%
  • Annual Dividend Yield: 0.61%
  • Average daily volume over three months: 34,386
  • $141.3 million in assets under management
  • Inception Date: Jan. 17, 2018
  • Issuer: SRN Advisors

The Nasdaq Blockchain Economy Index is followed by BLCN. The benchmark, created in collaboration with Nasdaq, assesses the performance of firms engaged in activities such as creating, studying, inventing, or using blockchain technology. 5 The ETF invests in both growth and value companies and generally purchases large-cap firms from developed economies.

Marathon Digital Holdings Inc. (MARA), a digital asset technology and mining business; MicroStrategy Inc. (MSTR), a mobile software, analytics, and cloud technology company; and Core Scientific Inc. (CORZ), a blockchain infrastructure and IT management services organization, are BLCN’s top three holdings. 6

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Amplify Transformational Data Sharing ETF (BLOK)

  • Over a year, performance was -42.0%.
  • Expense Ratio: 0.71%
  • Annual Dividend Yield: 1.09%
  • Average daily volume over three months: 306,053.
  • $662.1 million in assets under management
  • Inception Date: Jan. 16, 2018
  • Issuer: Amplify Investments

BLOK is an actively managed exchange-traded fund that invests at least 80% of its net assets in stocks of firms involved in the development and use of blockchain technology. The fund also claims that its investments are intended to provide clients with “indirect crypto exposure,” rather than direct investment in cryptocurrencies. It employs a hybrid approach in which it invests in a mix of value and growth companies with varying market capitalizations. The top three sector allocations of the ETF are IT services, financial markets, and software, which account for almost two-thirds of the fund’s holdings. 7

The fund’s top three holdings are MicroStrategy Inc., as previously indicated; Silvergate Capital Corp. (SI), a holding firm that offers banking and lending services; and Inc. (OSTK), an online retailer principally selling furnishings. 8

The views, opinions, and analyses presented herein are provided only for informational purposes and should not be construed as individual investment advice or recommendations to invest in any asset or pursue any investment plan. While we think the information presented above is trustworthy, we cannot guarantee its accuracy or completeness. The perspectives and methods represented in our material may not be appropriate for all investors. Because market and economic circumstances change rapidly, all comments, views, and analyses included in our material are current as of the date of publishing and are subject to change without notice. The information is not meant to be a comprehensive examination of every important fact pertaining to any country, area, market, industry, investment, or strategy.

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