Among the disruptive growth stocks being savagely repudiated this year are fintech names. Whether it’s bitcoin miners, buy now, pay later firms, or other companies in the fintech ecosystem, the point is the group is out of favor.
Add in the fact that more fintech companies are making crypto inroads at a time when bitcoin prices are sliding, and it’s not surprising that fintech equities are contending with stiff headwinds. Though not immune from the aforementioned issues, the VanEck Digital Transformation ETF (DAPP) is an example of an exchange traded fund with deep fintech ties that offers long-term promise.
“Despite fintech being an industry that’s finding it difficult in the wake of a widespread market downturn, the outlook remains positive overall in the wake of the Covid-19 pandemic,” reports Demytro Spilka for Fintech Magazine. “Whilst access to funding may become more of a challenge in a bearish market, the post-pandemic landscape is likely to create new opportunities for fintech firms.”
One of the primary near-term headwinds for DAPP is the financial condition of some bitcoin miners – an important constituency in this ETF. Recently, some miners are selling positions in the largest digital currency to fortify their cash positions. In some cases, that’s a necessary evil because the miners need the capital, but by flooding exchanges with bitcoin, they’re contributing to selling pressure on the very asset they mine.
Though it can be challenging to see the forest through the trees in turbulent times like these, there remains a compelling long-term case for broader fintech names, such as Block (NYSE:SQ). The company previously known as Square is indeed crypto-correlated, but there’s more to this name, which accounts for almost 9% of DAPP’s portfolio.
“The acceleration of digital transformation caused by Covid-19 has been especially lucrative for the world of fintech. As fewer customers prioritize banking with institutions that have nearby branches, there’s plenty of room for challenger banks to ramp up their charm offensive and win custom in a way that seemed impossible for online-only fintech just three years ago,” according to Fintech Magazine.
Among DAPP holdings, Block is the epitome of a company that’s disrupting the traditional financial services realm. It’s possible that, over time, Coinbase (NASDAQ:COIN) – DAPP’s largest component – becomes a more significant part of that conversation as well.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.