Bitcoin (BTC) may be down, but it’s not out. Plenty of investors remain captivated by digital currency, and as this universe evolves and matures, more ways to access it are coming to market.
That’s a positive for investors because as of late July 15, the going rate for just one Bitcoin is nearly $32,000, a price point inaccessible for many do-it-yourself investors. Fortunately, exchange-traded funds issuers are getting creative when it comes to crypto plays, leveraging a growing number of stocks with correlations and ties to digital coins to provide market participants with equity-based exposure to Bitcoin and beyond.
The Global X Blockchain ETF (BKCH), which debuted on Wednesday, is the latest entrant to this fray. Like established players in this category, BKCH is required to mention “blockchain” or some derivative thereof in its title. As evidence by their refusal to approve a dedicated Bitcoin ETF, U.S. regulators aren’t too fond of fund issuers using specific crypto names in ETF titles.
However, investors shouldn’t take that to mean the new BKCH lacks credible cryptocurrency exposure. Actually, the opposite is true. Let’s get into why that’s the case.
BKCH has ample Bitcoin derivative exposure
The newly minted BKCH tracks the Solactive Blockchain Index and is designed to provide exposure to companies capitalizing on “adoption of blockchain technology, including companies in digital asset mining, blockchain & digital asset transactions, blockchain applications, blockchain & digital asset hardware, and blockchain & digital asset integration,” according to Global X.
What’s critical for investors to note is that although blockchain is the backbone of crypto transactions, it has myriad applications beyond cryptocurrency. This is reflected in many of BKCH’s seasoned competitors, but the newer generation of blockchain ETFs, including the Global X fund, provide more direct exposure, albeit via equities, to digital coins.
Consider the following about the rookie ETF’s roster: Crypto exchange operator Coinbase (COIN), Bitcoin miners Marathon Digital (MARA) and Riot Blockchain (RIOT) combine for 35% of the fund’s roster. That’s a plus for investors seeking Bitcoin exposure without having to hold that asset directly. Likewise, BKCH’s blockchain credibility remains intact.
“Bitcoin, the best-known and largest cryptocurrency by market capitalization, is the first widespread application of blockchain technology,” according to Global X research. “Benefiting from the unique aspects of blockchain technology, Bitcoin has never been hacked or compromised, it is not governed by a central authority, and its transactions are made transparent across the network.”
Beyond Bitcoin
As noted above, BKCH is something of a best of both worlds type of fund because its equity-driven exposure to digital assets is barely rivaled in the category, but its blockchain allocations are sources of allure as well. Consider the corporate spending on blockchain initiatives, much of which has nothing to do with Bitcoin.
“Given this wide appeal, organizations are expected to spend $6.6 billion on blockchain solutions in 2021, a 50% increase from 2020,” adds Global X. “By 2024, total spending in blockchain solutions is expected to reach $19 billion, a 48% compound annual growth rate (CAGR).”
Beyond digital asset mining and transactions, blockchain technologies are used for supporting supply chains, digital health tracking and smart contracts, among other pursuits.
Bottom line: BKCH is an equity-driven Bitcoin ETF with blockchain exposure. Or it’s a blockchain fund with Bitcoin ties. Either way, it could be a sound way of accessing two themes under one umbrella.
