In lieu of an actual physical cryptocurrency ETF, blockchain ETFs can offer investors an indirect way to access crypto assets. But great disparity exists between the top- and bottom-performing ETFs.
The $1.1 billion Amplify Transformational Data Sharing ETF (BLOK) has risen 136% in the past 12 months, while the $113 million First Trust Indxx Innovative Transaction & Process ETF (LEGR) has risen only 44%.
What Is The Blockchain?
Blockchain ETFs track companies involved in the blockchain industry, be they developers, facilitators, or users.
Blockchain is a decentralized, incorruptible digital ledger that facilitates and records all kinds of transactions. This collective ledger is updated every time a transaction occurs, and the data is synchronized across the network of participants, ensuring transparency and trust.
The information in the blockchain is not stored in any single location, but is rather distributed and copied across a network of computers and other devices. This means that the records on the blockchain are public, verifiable, and accessible by anyone who has internet.
Breaking Down BLOK
The Amplify Transformational Data Sharing ETF (BLOK) is an actively managed ETF that allocates 80% of its holdings to the companies that are actively developing and utilizing blockchain technologies, with the remainder going to companies that have partnered with these technology companies.
BLOK is an ETF that primarily focuses on the developers of blockchain. It allocates 55% of its portfolio to software and services companies, 14% to diversified financials, and 6% to technology hardware and equipment.
BLOK also allocates to stocks of all sizes: 44% of its portfolio are large caps, 27% are mid caps, and 30% are small caps.
BLOK holds such high performers as MicroStrategy Inc (MSTR) (6%), Square, Inc. Class A (SQ) (4%), Galaxy Digital Holdings LTD (GLXY) (4%), and others.
In the past year, BLOK has risen 136%.
Breaking Down LEGR
Meanwhile, the First Trust Indxx Innovative Transaction & Process ETF (LEGR) is a passively managed ETF that offers exposure to companies that are actively using, investing in, developing, or have products that benefit from blockchain.
First Trust divides companies into 3 tiers: (1) Active Enablers, which are companies that are either developing blockchain products or technology, as well as services for either internal use or sale; (2) Active Users, which are companies using blockchain that is typically supported by an Active Enabler; (3) and Active Explorers, which are companies that have announced their interest in and intention to use blockchain but haven’t yet.
The index is weighted evenly between 50% Active Enablers and 50% Active Users with a total of 100 constituents. (Active Explorers are scored, but not included, in the index.)
LEGR has a different sector exposure than BLOK, with 36% of its portfolio in financial stock, 35% in information technology, and 8% within communication technology firms. Inside LEGR is a mix of blockchain developers and primary users of blockchain.
Another difference? LEGR only carries large cap funds. It has holdings in companies such as NVIDIA Corporation (NVDA) (2%), Maersk A/S Class B (MAERSK.B) (2%), and Fujitsu Limited (2%), as well as stocks like Amazon.com (AMZN), Microsoft Corp (MSFT), and others.
In the past year, LEGR’s closing price has risen 44%.
See more of a breakdown through the ETF Comparison Tool: BLOK vs. LEGR.
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