Despite Growth, Investors Still Cautious About Blockchain Exchange-Traded Funds (ETFs)


One of the most heavily pursued developments in crypto is the official approval of a crypto ETF by the Securities and Exchange Commission. It has been sought after for a long time with many companies applying and many being rejected. However, blockchain ETFs have been in operations since January 2018 when the first four began operations in the United States. The four tracked the share price of between 20 to 50 companies that either develop or make use of blockchain technology in exchange for a 0.75% management fee. They were a quick hit, with investors pumping hundreds of millions of dollars into the ventures which saved between $15 billion and $35 billion a year.

However, a quick look at the crypto market in the last 6 months will show that several aspects of the industry have been declining and this was not only limited to mining and the price of crypto itself but also the blockchain ETFs. Between the beginning of January 2018 and January 2019, the value of the 6 ETFs saw losses of between 5% and 20% in value. This, unfortunately, scared away some investors and the ETFs combined net investment assets loss about $21 million in combined net outflows with one of the blockchain ETFs even closing shop in January 2019.

Making Recovery

Fortunately, the market reports in the last 6 months show that there is an upside with KOIN being the best performing with up to 22% YTD. This is not limited to KOIN either, as many of the more recent ETF have seen an increase in the last few months. Just as the market downturn saw a decline in investment in blockchain ETFs, the market recovery seems to be sending business their way.

Not out of the Woods

Even with all this progress being made, investors are still treading carefully into blockchain ETFs. For example, several ETFs are still seeing lower AUMs today than they did in January.

“While blockchain ETFs have posted positive returns this year, they’ve substantially lagged the broader tech industry,” said Matt Hougan, Global Head of Research at Bitwise Asset Management, who stated that he is surprised that there isn’t more outflow. “It’s hard to get investors to pay the 0.70% or 0.68% expense ratio for BLOK or BLCN when XLK charges 0.13%, is more liquid and has delivered better returns.”

In spite of this, it is important to know that relative to the S&P 500’s return-to-year deal, several blocking ETFs give better deals for investors. Also, it is worth noting that not all the companies been exposed to investors are purely blockchain-based or even blockchain-focused as some merely have a casual interest or some business around the technology. It is also a good way for those who want to dip their toes into the industry to get started without too much risk

“I’m glad these ETFs exist as they open up conversations about blockchain technology with professional investors, and I think eventually there will be enough pure-play companies to have real, pure-play blockchain equity ETFs. But right now, the industry is too new to make that a reality,”

said Hougan.

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