Despite a recent downslide by bitcoin, several crypto equities within the crypto sector are experiencing gains today, including crypto miners and major crypto exchanges, reports Barron’s.
The move could be a reflection of a movement into tech shares happening on Monday, with the Nasdaq Composite having gained 1% in trading by early afternoon and outperforming the S&P 500. At the same time, major cryptocurrencies such as bitcoin and ether were both down 1% in trading, with popular altcoins down by further margins.
The division in performance highlights one of the ongoing uncertainties in how the crypto space will be largely used by investors, either as a proxy for risk assets such as tech, or as an inflation hedge in rising interest rate environments. The difference is a huge margin in how the space will respond this year and going forward and marks a large turning point as crypto assets really begin to differentiate themselves from cryptocurrencies.
On one hand, it makes sense that the crypto space would be a proxy for tech investment, as it can offer the opportunity for high growth that tech does. These types of stocks tend to suffer in higher rate environments, however, as future cash flow companies generally experience smaller margins and reduced future earnings, which impacts their present value.
There have already been some factors indicating that the crypto sector is responding as a tech proxy would; at times when bond yields have spiked, the sector has come under pressure. Bitcoin is down for now, ending the year at $48,000, a drop of nearly 30% from its earlier record highs. Whether it will hold at its current floor around $45,000 remains to be seen, and the price fluctuation of the popular cryptocurrency so far has been difficult to link to a particular correlation to Treasuries, whether inverse or positively aligned.
Another option for crypto is that its cryptocurrencies and tokens could become an inflationary hedge and a store of value. The debate is still continuing on the merits of hedging a portfolio with gold versus bitcoin or other cryptocurrencies, however, and many investors seem to remain skeptical on the use of crypto in their portfolios.
Cryptocurrencies as a store of value could be getting a boost from the continued adoption of bitcoin by institutional investors as an alternative asset for their portfolios, as well as the growing popularity of altcoins for their smart contracts. With major upgrades in store for the Ethereum network, crypto as a whole could be looking to make gains this year on the technological side.
Investing in Crypto Assets With BLOK
With crypto equities such as miners and exchanges diverging from cryptocurrencies in performance more frequently, investors looking to gain exposure need look no further than the Amplify Transformational Data Sharing ETF (BLOK).
BLOK currently has $1.15 billion in AUM, is actively managed, and invests in companies directly involved in developing and using blockchain technology. BLOK was also the first blockchain ETF approved by the SEC and launched in 2018.
The fund invests in companies partnered with or directly investing in companies utilizing and developing blockchain technologies. However, the fund does not invest directly in blockchain technology or cryptocurrencies.
BLOK spreads its holdings across the size spectrum, investing in all market caps. As of the end of September, top allocations within the blockchain industry included transactional at 30.0%, crypto miners at 28.0%, and venture at 10%. BLOK invests across the blockchain landscape, in miners, exchanges, and developers.
Top holdings include Coinbase Global Inc. (COIN) at 4.80%, Galaxy Digital Holdings Ltd at 4.44%, and Silvergate Cap Corp (SI) at 4.38%.
BLOK has an expense ratio of 0.71% and currently has 47 holdings.
For more news, information, and strategy, visit the Crypto Channel.