Investing in Cryptocurrency ETFs is NOT THE SAME as investing in Cryptocurrency!
Cryptocurrency/Blockchain ETFs (Portfolio Management #2)
There's been a lot of chatter lately about the new ETFs that have sprung up around cryptocurrency/blockchain. ETFs, which stand for exchange traded funds, can be a useful way to invest in a particular sector or index (like Technology or the S&P 500). The funds are designed to track an index of holdings to give you the same gains/losses, but also provide more diversification and liquidity.
So when I first heard about crypto ETFs, I got really excited!
But I soon realized...
Cryptocurrency ETFs don't invest in ACTUAL cryptocurrency right now!
There are four major cryptocurrency ETFs in the market right now, with more undoubtedly on the way. BUT if you look closely, they each "give investors a basket of stocks that stand to gain from the cryptocurrency growth, while minimizing the risk of investing in individual stocks." That means none of them actually hold any cryptocurrency!
The four major funds right now are:
- Amplify Transformational Data Sharing ETF (BLOK)
- Reality Shares Nasdaq NexGen Economy ETF (BLCN)
- First Trust Indxx Innovative Transaction & Process ETF (LEGR)
- Innovation Shares NextGen Protocol ETF (KOIN)
Take a look at LEGR for example, most of its holdings are in stocks which contribute mining hardware (e.g., Nvidia) or stand to benefit from blockchain.
Koin is pretty similar. Koin noted in their press release that "the KOIN index focuses in cryptocurrency as a means of payment, mining enablers, solutions providers and adopters," but also shows a similar breakdown of major bluechip companies.
Now this doesn't meant that there isn't value in these ETFs. But just know that you're NOT investing in CRYPTOCURRENCY itself - just companies that the funds THINK stand to benefit the most off blockchain.
For now, I'm continuing to hold most of my crypto investments in actual crypto coins themselves.
Thanks for reading and please feel free to leave any comments or questions below!
Disclaimer: This is only my opinion and is not a recommendation for a certain investment action or strategy.
Good to know! Without proper research, I'm sure many assumed these ETFs invested in actual coins. It won't be long until new ETFs surface that actually invest in coins.
Absolutely! Up to us to do our research before investing our hard earned cash. Agreed that we're not far from some ETFs actually investing in coins though! That'll be interesting
Great info here! Due diligence is KEY before you put $$$$ in any investment. Unless her name is Sweet Brown...she's hard to convince for some reason. Go figure.
Thank you so VERY much for sharing this extremely valuable information. I am a Crypto newbie and I sincerely appreciate posts like this. Thanks Again! :)
Thanks for reading and glad it was helpful! Will hopefully be following up with more posts soon on comparing actual returns of crypto vs. other assets
My pleasure! It was very helpful! I look forward to more of your posts. :)
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