Blockchain exchange-traded funds (ETFs) own stocks in companies that have business operations in blockchain technology or profit from it in some way. Blockchain is made up of complex blocks of digital information and is increasingly used in banking, investing, cryptocurrency, and other sectors.
Although blockchain is a relatively new technology, many of the companies that operate in the space are well established. Some examples include International Business Machines Corp. (IBM), Oracle Corp. (ORCL), and Visa Inc. (V).
Many investors may be wary of risking an investment in blockchain due to the technology’s association with the volatile cryptocurrency market. However, blockchain is not the same thing as cryptocurrency, and blockchain ETFs invest only in stocks of regulated companies, many of which are big blue-chip technology firms that have no direct involvement in cryptocurrency.
Key Takeaways
- The broader information technology (IT) sector outperformed the market over the past year, although all three blockchain ETFs on our list underperformed.
- The top blockchain ETFs, ranked by one-year trailing total return, are LEGR, BLCN, and BLOK.
- The top holdings of these ETFs are sponsored ADRs of ICICI Bank Ltd., Marathon Digital Holdings Inc., and Class A shares of MicroStrategy Inc., respectively.
Five blockchain ETFs trade in the United States, excluding inverse and leveraged ETFs as well as funds with less than $50 million in assets under management (AUM). This list excludes the Bitwise Crypto Industry Innovators ETF (BITQ) and the Global X Blockchain ETF (BKCH), both of which launched in 2021 and have so far failed to rise to the level of performance of the top three funds on our list.
Although there is no benchmark index for the blockchain industry, the broader tech sector is a reasonable reference point. The S&P 500 Information Technology Sector Index has outperformed the broader market in the past year, providing one-year trailing total returns of -1.8%, compared with -2.6% for the S&P 500 as of Aug. 12, 2022. Note that all three blockchain ETFs below underperformed the broader market over that period. The best-performing blockchain ETF, based on performance over the past year, is the First Trust Indxx Innovative Transaction & Process ETF (LEGR). We examine the top three blockchain ETFs below. All numbers below are as of Aug. 12, 2022.
- Performance Over One Year: -13.5%
- Expense Ratio: 0.65%
- Annual Dividend Yield: 1.26%
- Three-Month Average Daily Volume: 12,755
- Assets Under Management: $123.0 million
- Inception Date: Jan. 24, 2018
- Issuer: First Trust
LEGR tracks the Indxx Blockchain Index. The benchmark gauges the performance of companies that are using, investing in, or developing blockchain technology, or that have products that are positioned to benefit from the technology. The ETF normally invests a minimum of 90% of its net assets in equity securities that comprise the index. Financials make up the largest portion of the portfolio at just over 37%, followed by information technology (IT) and consumer discretionary stocks.
LEGR’s top three holdings are 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.
- Performance Over One Year: -35.7%
- Expense Ratio: 0.68%
- Annual Dividend Yield: 0.61%
- Three-Month Average Daily Volume: 34,386
- Assets Under Management: $141.3 million
- Inception Date: Jan. 17, 2018
- Issuer: SRN Advisors
BLCN tracks the Nasdaq Blockchain Economy Index. The benchmark, developed in partnership with Nasdaq, gauges the performance of companies involved in activities including developing, researching, innovating, or using blockchain technology. The ETF owns primarily large-cap stocks from developed markets and follows a blended strategy, investing in growth and value stocks.
BLCN’s top three holdings are Marathon Digital Holdings Inc. (MARA), a digital asset technology and mining company; Class A shares of MicroStrategy Inc. (MSTR), a mobile software, analytics, and cloud technology company; and Core Scientific Inc. (CORZ), a blockchain infrastructure and IT management services firm.
- Performance Over One Year: -42.0%
- Expense Ratio: 0.71%
- Annual Dividend Yield: 1.09%
- Three-Month Average Daily Volume: 306,053
- Assets Under Management: $662.1 million
- Inception Date: Jan. 16, 2018
- Issuer: Amplify Investments
BLOK is an actively managed ETF that invests a minimum of 80% of its net assets in stocks of companies engaged in the development and use of blockchain technologies. The fund also says that its investments are aimed at giving investors “indirect crypto exposure,” rather than investing directly in cryptocurrencies. It follows a blended strategy, investing in a mix of value and growth stocks of varied market capitalizations. The ETF’s top three industry allocations are IT services, capital markets, and software, which together comprise about two-thirds of the fund’s holdings.
The fund’s top three holdings are Class A shares of MicroStrategy Inc., described above; Class A shares of Silvergate Capital Corp. (SI), a holding company that provides banking and loan services; and Overstock.com Inc. (OSTK), an internet retailer primarily selling furniture.
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