As bitcoin soars, investors are hearing more and more about blockchain, the centralized transaction record for all cryptocurrencies. Over the past month, several exchange traded funds issuers have revealed plans for ETFs that are plays on blockchain.
Some existing ETFs offer blockchain exposure as well, including the VanEck Vectors Semiconductor ETF (NYSEArca: SMH). Semiconductor ETFs have recently been durable performers as semiconductor stocks are rebounding to steady the broader technology sector, but that does not mean the gains are over for this suddenly hot group. However, valuations are rising for chip stocks. Some data points indicate the bullishness can continue for chip stocks and the related ETFs.
“Blockchains – often referred to as distributed ledgers – create and enable immutable records that can be cheaply and securely verified by anyone, not just a central authority,” according to VanEck research. “As the technology sees increasing acceptance, its potential is being explored across government entities and numerous industries, including in financial services, healthcare, legal and consumer – anywhere secure recordkeeping is a requirement.”
Big-name diversified technology ETFs also feature semiconductor exposure. For instance, the Technology Select Sector SPDR Fund (NYSEArca: XLK) includes companies from technology hardware, storage, and peripherals; software; diversified telecommunication services; communications equipment; semiconductors and semiconductor equipment; internet software and services; IT services; electronic equipment, instruments and components; and wireless telecommunication services.
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However, more focused plays such as SMH offer increased blockchain exposure via holdings such as Nvidia Corp. (NASDAQ: NVDA) and Advanced Micro Devices, Inc. (NASDAQ: AMD). Both companies make chips used in the mining of digital currencies.
“Blockchain technology and miners in particular are totally dependent on electronic components consisting of vast numbers of semiconductors,” according to VanEck. “VanEck believes that exposure to semiconductor manufacturers, especially those who are suppliers to miners, offers a compelling investment opportunity. Investment exposure to semiconductors may provide access to both the growth potential of blockchain technology, as well as the entire blockchain economy.”
Recent filings with the Securities and Exchange Commission (SEC) show other ETF issuers have plans for blockchain ETFs, but it does not appear these products are close to coming to market, leaving SMH as one of the more readily available blockchain ideas.
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