Blockchain Related ETF Trading On NYSE / Actively Managed ETF vs Passively Managed ETF
Yes, you read that right ! There are two blockchain-related ETF's trading on the New York Stock Exchange. Their tickers are BLCN (Reality Shares NASDAQNexGen Economy ETF) and BLOK (Amplify Transformational Data Sharing ETF). These two made their debut on the 17th of January and as far as I can tell they were well received (See charts 1 and 2).
Looking at the charts above there is little doubt that investors liked the idea for blockchain-related ETF. Of course we should mention that Equities in general are in a fierce bull market, which makes it impossible for this funds to look any different at the moment, considering the fact that they invest in tech companies. It is important to add that BLCN is passively managed and BLOK is an actively managed fund.
Passively Managed ETF
According to Investopedia
Passive ETFs are a vehicle to track an entire index or sector with a single security.
Read more: Passive ETF https://www.investopedia.com/terms/p/passive-etf.asp#ixzz5538mf8z9
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Actively Managed ETF
According to Investopedia
An actively managed ETF will have a benchmark index, but managers may change sector allocations, market-time trades or deviate from the index as they see fit. This produces investment returns that do not perfectly mirror the underlying index.
I know this might be a bit confusing, so let me try with an example.
We have two funds - A and P, A is actively managed and P is passively managed. Let's say they are blockchain-related ETF's. Fund P has invested in Bitcoin, ETH and Ripple, Fund A has invested in the same three currencies. The passively managed fund A will track as closely as possible BTC, ETH and XRP and will essentially move with them. Same goes for the actively managed fund - A. Let's say the research team of fund A (actively managed) sees an incredible investment opportunity in EOS, Steem and BTS, they can decide to re-allocate their assets and "change course" so to speak. The passively managed ETF does not have that freedom and is bound to track BTC,ETH and XRP.
The passively managed ETF can not outperform the index it is meant to track. So in our example above, fund P can't outperform BTC, ETH, XRP. Passive ETF's will not respond to changes in the markets.
The actively managed ETF CAN outperform passive ETF's and the index they are tracking. Of course it also can be the other way around. In general active ETF's have higher fees and can really take a hit of things go wrong.
Overall Passive ETF's are far more preferred than Active ETF's. The biggest passive ETF is SPY, tracking the S&P 500.
Back to BLOK and BLCN
Both funds will focus on companies that either invest in, develop or profit from blockchain technology. But make no mistake, because both funds have different investment criteria and strategy. Also only 61% of their holdings overlap, you can take a look at their top holdings below.
BLOK TOP 10 Holdings
BLCN TOP 10 HOLDINGS
I guess a lot of people are not expecting to see this kind of holdings when you hear blockchain-related ETF. But bear in mind that these funds have invested indirectly in cryptocurrencies, for example the Canadian HIVE mines Ethereum so while there are no direct holdings of tokens in the ETF there are holdings of companies which themselves have holdings of these tokens. Another interesting holding of these funds is SBI, which owns 10% of Ripple ( Not 10% of XRP token, but 10 % of Ripple (the company).
Another interesting investment is Taiwan Semiconductor, the largest holding and that is most likely because they are the large manufacturer of the chips needed for all the crypto mining going on.
Notable mentions - Visa, Google, Oracle, Square, Intel and many others.
For me these ETF's are great vehicles for investment. You get exposure to blockchain, but you are also protected because some of these companies are considered very safe (blue chips) and the funds also have some speculative holdings. The holdings are very well diversified, which is a further insurance against volatility. I will be very interesting to see how they will perform. For now I haven't invested, but I watch them closely for a good entry point.
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Sources
http://etfdb.com/etf/BLCN/
https://www.investopedia.com
https://seekingalpha.com/article/4138630-blockchain-etfs-deep-dive-blcn-blok
https://www.bloomberg.com/news/articles/2018-01-17/two-blockchain-etfs-launch-today-but-they-re-going-incognito
Thanks, I'd heard about these recently. It seems like by limiting their investments to established companies they end up with only moderate exposure to the success and adoption of actual blockchains, but they still may be reasonable ETFs.
Yes, that is a good thing in my opinion, because it will give investors exposure into some aspects of blockchain ,without the excessive volatility. Thanks for your comment, I appreciate it.
Hi I would love to see a ETF that tacks the return of like the top 10-100 coins that would make sense. But in my eyey they just use the blockchain hype put out a product and cash in some fees. The underlying companies have not much to do with the blockchain revolution itself.
Yes, Their core-business are generally different, but they have stakes in companeis that do it for real. So, I understand what you are saying, but I think it will be a lot better if you make your own funds then. Buy a basket of tokens you like and just keep them in a Ledger, for example. Thanks for commenting
Kodak just came out with a coin as well so they went block chain.. Good article..
Yes, it's called KodakOne platform. I am not very thrilled about it, to be honest.
No idea, I know the stock price doubled upon announcement of Kodak entering crypto.. which I find interesting and if I were a CFO of a large currently traded NYSE or NASDAQ company and were on a golf trip to Vegas with the CEO that was really just cover for us to bang prostitutes in a Vegas hotel..
I would be like "Hey Bro".... stops to sniff coke from hookers butt crack.. "bro, did you hear about that Kodak stuff? They made a coin and their stock price doubled"
CEO: "Really"
"Yeah, we can just make a useless coin, stock price will double because its crypto and we can come back next year and buy the really good hookers.. what do you think?"
CEO: "lets do it"
Humor aside, I can see a lot of other companies taking a similar route if for nothing other than to bump price as appearing to be involved in crypto regardless of whether or not it is a junk coin.
Yes, this is like the times of the .com bubble. People were just putting .com on their company names, making 100-500% move in a day. Of coure all of this has an end. If you look at the charts of these companies, they have made a mojor move up, but then made a good move downwards also.
Very true,, what goes up must come down..")
So, what do you think about SBD ? I don't think the listing is all there is for this volume
I agree, prices could be in the process of being manipulated to some degree.. only take 1 milion to swing the price a lot in one way or the other and there are a lot of whales here with that type of power..
The above two factors passive ETF and active ETF are very new subject to me. Great explanation, comparison and awesome example. resteemed to our steemians knowledge.
Thank you ! I hope it was helpful :)
yes...