“Those two issues are important to me to get comfort on before we would allow an ETF with a digital currency underlying it to go forward,” Clayton explained. Source ETF.com
Blockchain Is Now More Searched Than Bitcoin
Based on the comments above, it appears a Bitcoin ETF is both contradictory and far from launching. That said, there are multiple Blockchain ETFs in the market. In full disclosure, the Toroso Research team actively manages a strategy used by the advisor of the largest Blockchain ETF. As a technology, we believe Blockchain has the potential to change how many businesses secure and share data. The chart below from CB insights highlights how investors have shifted their interest from one use case, Bitcoin, to the underlying technology itself:
Are Blockchain and ETFs Frenemies?
There has been a significant shift in the proposed first use cases for blockchain. Last year, the hype was on ICO’s and utility tokens that promised to replace centralized applications like social media with decentralized protocols like Steem. The charts below show the shift in investor sentiment toward “security tokens”:
- Theoretically, the use of Blockchain could remove the need for many trusted financial institutions in security transactions. Security Tokens could revolutionize the way exchanges, brokers, custodians, and traders conduct business. We see this as an opportunity for further ETF growth and/or evolution in the ETF structure. There is actually significant overlap in the institutions involved with this transition. Of the financial companies in the Blockchain ETFs, 8 are also in TETF.index:
- GOLDMAN SACHS GROUP INC
- CME GROUP INC
- NASDAQ OMX GROUP/THE
- JPMORGAN CHASE & CO
- INTERCONTINENTALEXCHANGE INC
- THOMSON REUTERS CORPORATION
- CBOE HOLDINGS INC
The ETF Ecosystem Will Evolve and Grow
As the hype subsides, the true promise of blockchain technology will be recognized. The evolution of finance will likely foster more ETF growth even if it forces changes and improvements to the structure. ETF assets have grown consistently for 25 years at close to 20% annualized. The TETF.index team views Blockchain as a forced evolution to the ETF technology than can only foster further growth and alignment with our clients.
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