Do you want to get exposure to blockchain technology but not invest directly? A blockchain ETF could be precisely what you're looking for. Funds that trade on an exchange (ETFs) can be a convenient method for investors to get exposure to securities they do not want to directly. Because many ETFs index a specific sector or industry, investors can put their money into the certainty that the portfolio will increase when the sector is experiencing growth and contract when it declines. As with other sectors, commodities and stocks, there are a lot of investors taking a closer glance at the growing blockchain technology, which has led to the development of ETFs based on blockchain technology. What is an ETF on the blockchain, and how does it function?
Let's begin by discussing ETFs in the first place. An ETF is simply an assortment of securities traded through an exchange. Securities are bonds, stocks, mutual funds, stocks, and many more. They are usually created to reflect a particular market sector, to show how the specific industry is doing.
An ETF can accomplish this by buying the items that compose any market segment being tracked. However, they also can track specific assets.
What is an ETF and how does it work? Source: Youtube, BetaShares - Exchange Traded Funds
An ETF typically gets investment from a variety of sources and pools them. The process of creating an ETF is a complex one, and we'll not get into that in the present moment.
Various ETFs are currently in use, including bonds, commodity, stock, and sector or industry ETFs, which are under the umbrella of blockchain ETFs. So, let's look at the basic concepts of blockchain ETFs.
Therefore, a blockchain ETF can only invest in companies that are based on blockchain technology. It is possible to believe the blockchain tech is exclusive to cryptocurrency, but it's not the case whatsoever. Numerous organizations incorporate blockchain tech into their systems, including voting systems and loans, real estate companies, and platforms for data storage. Amazon utilizes blockchain technology in a few of its business operations!
Best Blockchain ETF Funds | Crypto & Bitcoin ETF 2021 Review, Source: Youtube, GO Invest
There are several major blockchain ETFs on the market right now, including those from Siren NASDAQ NexGen Economic ETF and the Bitwise Crypto Industry Innovation ETFs. Although their names can be somewhat long and confusing, the ETFs share the same objective of investing in promising businesses to generate returns. Investors interested in the fund will be paid annually in dividends if the fund and its securities do well enough to make an income (though there are exceptions to the rule that all ETFs offer tips).
Every company that can become part of an ETF receives the score of a blockchain. This shows how influential the business is in blockchain and determines if it is a suitable contribution to the ETF. The companies that get among the top positions on the score list are then added to the ETF.
Anyone can invest in ETFs that are blockchain-related, and this investment choice is currently getting more attention due to the growing popularity of blockchain technology via cryptocurrency. However, ETFs based on blockchain technology aren't yet established, and, as with the cryptocurrency market, they are considered somewhat risky. Although there are numerous successful businesses using blockchain technology, most have not had success which is the main reason for contention concerning these funds.
It's crucial not to mix blockchain ETFs with Bitcoin ETFs and Ethereum ETFs, which are also referred to as crypto ETFs.
Bitcoin ETF Explained | Should You Invest?, Source: Youtube, Marko - WhiteBoard Finance
Though blockchain ETFs cover the entire spectrum of businesses that use blockchain technology, the worth in a currency ETF is only on the value of the token connected to, which usually makes them more volatile than blockchain ETFs can ever be. Their primary purpose is to expose markets for cryptocurrency without actually owning the asset.
As blockchain technology becomes more popular, we might soon see an increase in investors investing in ETFs that are based on blockchain as a means to be part of the action and earn money from this growing sector. While this type of fund is still relatively new, it may offer a bright future as the development of blockchain continues in the coming years.
Hope this article is helpful to you, thanks for reading.