What is the difference between Blockchain ETFs and Bitcoin ETFs?
Bitcoin, as always, is gaining momentum in the investment world, the bitcoin ETF has not yet been released and we can only wait for its release. But, despite everything, the blockchain ETF has already been released on the main sites. Blockchain and bitcoin are in close connection with each other. As a result, some investors often confuse blockchain ETFs with bitcoin ETFs.
Что такое ETF
ETF (Exchange-Traded Funds) is a special fund thanks to which you can diversify your stake, that is, purchase shares of different companies. Investing in one or two companies is dangerous – the wider your investments, the less you lose when the company goes bankrupt. However, it is difficult to engage in such an investment independently:
- Almost no one allows you to purchase one or two shares, the alternative is to buy a package that is not cheap.
- You need to spend a lot of time looking for promising companies and monitor the market.
- All your free time should be devoted to monitoring the stock prices of your own package.
To avoid wasting time and labor, ETFs that represent a set of securities help. You purchase a share of the fund, after which you have a part of all its investments. This is quite convenient, thanks to this, the ETF has gained a lot of popularity.
Subtleties of terminology
To understand the difference between bitcoin ETFs and blockchain ETFs, you need to know how they differ. Bitcoin is a cryptocurrency, and blockchain is its basic technology. Roughly speaking, bitcoin is produced by blockchain. This is a big difference in terms of investment.
Despite the fact that bitcoin futures are already being considered and will probably see the light soon, the regulatory status of the cryptocurrency is still unclear in most jurisdictions. It is involved in numerous regulatory battles and is under scrutiny for its role in facilitating criminal activities, such as money laundering.
On the other hand, many financial market experts favor blockchain, one of the representatives is JP Morgan CEO Jamie Dimon. Blockchain is not banned and is not under the scrutiny of regulatory authorities.
There are already five blockchain ETFs in regulated markets. Four of them were launched in 2018 and one in April 2021, and the total assets under management of the company as of April 2021 amounted to $ 1.7 billion. Their expense ratio ranges from 0.65% to 0.95%.
According to a Wall Street Journal report, investors invested $180 million in blockchain ETFs during the first two weeks after their launch. Trading volumes on these ETFs were also higher compared to other similar instruments launched since October 2017.
The Difference between Bitcoin ETFs and Blockchain ETFs
Blockchain ETFs primarily track stock market prices of companies that have invested in blockchain technology in their fund. Since bitcoin is absolutely independent and is not tied to any of the companies.
The blockchain universe of investments is large and is not limited to a specific sector. For example, IBM has entered into a partnership with the cargo transportation company Maersk to introduce blockchain into the cargo industry. Similarly, e-commerce company Overstock invests in blockchain through its Medici Ventures and tZERO digital coin exchange service. Naturally, these companies are favorites of blockchain ETFs. For example, Amplify ETFs’Amplify Transformational Data Sharing ETF (BLOK) and Siren Shares Nasdaq NexGen Economy (BLCN) have included both companies in their ETFs.
Most applications for bitcoin ETFs before the SEC offered to track the price of bitcoin using futures contracts traded on Cboe and CME. In this model, ETFs track the price of bitcoin through the ownership of futures contracts.
As of today, blockchain ETFs are relatively less volatile compared to bitcoin ETFs. This is because they are not subject to the volatility of wild bitcoin price fluctuations.
In any case, the blockchain is still a young system, and today it does not represent a large market. Therefore, ETF prices fluctuate regardless of blockchain technology. After the release of bitcoin ETFs, they will be directly affected by the regulatory authorities' policies regarding bitcoin and cryptocurrencies.