Lesson 10: Blockchain shares and ETFs

11:45, 08 September 2022

Blockchain shares and ETFs are increasingly important and very popular amongst investors. Here are the best ways retail investors can invest and support this new technology.

Blockchain technology is the foundation stone for popular cryptocurrencies like Bitcoin and Ethereum. But the technology has many other use cases, and big companies are starting to implement it. That’s why blockchain shares like Riot and blockchain ETFs like Invesco are increasingly important and very popular amongst investors.  

There are many ways that retail investors can invest and support this new technology. Let’s see how you can invest in the blockchain boom through company shares and funds.  

What is Blockchain?

Blockchain is a shared and immutable ledger that records transactions and tracks digital and non-digital assets using a computer network. An asset could be tangible (a car, house, cash, land, etc.) or intangibles (intellectual property patents, copyrights, and branding). A blockchain network allows anyone to track and trade virtually any asset, which reduces the risk of losing track of funds, and cuts costs. 

At the core of the blockchain are the information blocks, which are basically a string of information. Every data block is kept in a time-stamped open ledger that all participants can access. This makes blockchain technology particularly useful in industries such as banking, where security is important. 

To learn more about blockchain and how this technology works, please read our dedicated guide here:  What is blockchain?  

What are Blockchain Shares?  

There are many public companies that research, develop or use blockchain technology. Nvidia (NVDA) and IBM (IBM) are two of the most well-known companies in blockchain development. Many more companies are developing blockchain applications. There are many markets to choose from, including decentralized finance, financial technology, exchanges, and the metaverse. 

Top Blockchain Shares in 2022 

Most investors do not realize how many of these blue-chip companies have already incorporated blockchain in their operations. They also offer services related to blockchain to customers or participate in the cryptocurrency market.  

Here is a list of the top blockchain shares in 2022 that you should consider if you want exposure to this exciting technology in your stock portfolio.  

Square, Inc. (SQ)
Number of Hedge Fund Holders: 94 

Square is one of the world’s leading financial payments processing platforms, which, like other firms, has also started to make profits from the Bitcoin market. Square, Inc. is also one of the largest companies in terms of revenue earned through Bitcoin after it revealed that it had managed to bring in $6.2 billion from the cryptocurrency during the first half of 2021. 

>> How to Buy Square shares 

Nvidia (NVDA) 
Number of Hedge Fund Holders: 86 

This is the largest manufacturer of graphics processing units (GPUs), which are one of the most important hardware components for cryptocurrency mining. Plain and simple, the blockchain wouldn’t work without these GPU cards. Although sales of Nvidia's crypto-targeted CMP chips have cooled off a bit, during 2021 they’ve still generated more than $100 million in quarterly revenue for the company. 

Honeywell International Inc. (HON) 
Number of Hedge Fund Holders: 57 

Honeywell International Inc. (NASDAQ: HON) operates in four segments which cover the productivity, building technologies, materials, and aerospace markets. Honeywell also became one of the first companies in the world in 2019 to bring the reliability of blockchain technologies to the aerospace segment, as it used the secure ledger platform to introduce an online marketplace which significantly reduced transaction times in a highly sensitive market that needed secure part authentication. 

>> How to Buy Honeywell shares 

Coinbase (COIN) 
Number of Hedge Fund Holders: 49 

Coinbase is the largest cryptocurrency exchange in the world, offering more than 100 cryptocurrencies. There are approximately 73 million users verified in over 100 countries and more than $1 billion of cryptocurrency trading volume through the company's platform. 

Number of Hedge Fund Holders: 41 

IBM Blockchain, on the blockchain side, has already offered transformative solutions to clients like Kroger, True Tickets, and others. If blockchain-based solutions gain more popularity, the company could see significant growth. 

>> How to Buy IMB shares 

VMware, Inc. (VMW) 
Number of Hedge Fund Holders: 28 

VMware offers its enterprise customers the VMware Blockchain platform which is primarily focused on providing the companies with a secure platform for their daily transactions and other record-keeping needs. 

>> How to Buy VMware shares 

Marathon Digital Holdings, Inc. (MARA) 
Number of Hedge Fund Holders: 19 

Marathon Digital Holdings emerged in the market in the aftermath of the boom in cryptocurrencies and it is also a publicly-traded company. MARA runs cryptocurrency mining facilities capable of consuming megawatts of electrical power and it reported $38 million in revenue during the first half of this year. 

>> How to Buy MARA shares 

Riot Blockchain (RIOT)  
Number of Hedge Fund Holders: 17 

Formerly known as Bioptix, Riot Blockchain is focused on increasing exposure to the blockchain ecosystem via its cryptocurrency mining operations and internally developed businesses. It also invests in targeted investments in this sector. The Company is primarily focused on Bitcoin and general blockchain technology. 

The recent crackdown in China on Bitcoin miners has also injected Riot Blockchain with fresh optimism. According to analysts, Riot Blockchain stock is heavily undervalued, with the consensus price target of $82. For this reason, Riot Blockchain stock entered our top 22 stocks to buy for 2022. 

>> How to Buy Riot Blockchain shares 

MicroStrategy Incorporated (MSTR)
Number of Hedge Fund Holders: 16 

MicroStrategy Incorporated Bitcoin portfolio is also one of the largest out there, as the company owned close to $3 billion of the cryptocurrency by the end of June this year. 

MicroStrategy’s core software business is also benefitting from its status as a leader in the bitcoin space, with the increased public attention aiding MicroStrategy’s recruitment and marketing efforts as the software business continue to transition to a cloud-based subscription model. 

>> How to Buy MicroStrategy shares 

HIVE Blockchain Technologies (HIVE)
Number of Hedge Fund Holders: 11 

HIVE Blockchain works to build a bridge between the blockchain space and traditional capital markets. HIVE Blockchain is also involved in mining cryptocurrencies such as Ethereum and Bitcoin, using 100% green energy. 

>> How to Buy HIVE Blockchain shares 

Argo Blockchain plc (ARBKF)
Number of Hedge Fund Holders: 10 

Argo Blockchain is a United Kingdom-based cryptocurrency mining company. Argo is a mining-as-a-software (MaaS) service provider that makes it easy for clients to mine Bitcoin Gold, Ethereum, and other alternative coins (altcoins) through the cloud. 

>> How to Buy Argo Blockchain shares 

Other blockchain stocks that Wall Street analysts recommend: 

  • CME Group (CME). This is the largest options and futures exchange. It offers futures on Bitcoin and Ethereum. It also is the only exchange that creates a market for cryptocurrency futures contracts, although rival exchange CBOE is planning to reenter the space in the future. 

  • Mastercard (MA). Mastercard announced a partnership with R3 blockchain technology company to develop a cross-border payment system. This could give the company a significant competitive advantage by eliminating major barriers to international money transfers. 

  • DocuSign (DOCU). DocuSign is the market leader in eSignature technology. They have used blockchain technology since 2015 to allow customers to record their agreements using the Ethereum blockchain.  

  • Amazon (AMZN). Amazon Managed Blockchain is a feature of the AWS (Amazon Web Services) platform that allows customers to manage and create their own blockchain networks. Amazon has the potential to incorporate blockchain technology in its huge e-commerce business. How to buy Amazon shares. 

  • PayPal Holdings Inc. (PYPL). Digital payments specialist PayPal is fully embracing cryptocurrency and blockchain technology. Not only can users buy and sell crypto in their PayPal accounts, but PayPal is also reportedly exploring the launch of its own stablecoin that would be backed by the U.S. dollar. 

  • Advanced Micro Devices Inc. (AMD). Semiconductor company Advanced Micro Devices is developing a central processing unit and graphics processing unit technology aimed at making blockchain transactions faster and more secure. The company is also working on developing blockchain compute solutions with a wide variety of use cases.  

What are Blockchain ETFs  

An ETF (Exchange-Traded Fund) is an investment product that is based upon an underlying asset. A blockchain ETF owns stocks in companies that have business operations in blockchain technology or profit from it in some way.

Most investors are still precautious when investing in blockchain shares, especially due to the blockchain association with cryptocurrencies and their highly volatile values.  

Bear in mind that blockchain technology is different from cryptocurrency, and a blockchain ETF is different from a cryptocurrency ETF, including the first Bitcoin ETF launched in 2021. For instance, blockchain ETFs invest only in stocks of regulated public companies. Many of these are popular blue-chip tech companies with no direct cryptocurrency involvement.  

ETFs can also be traded on the regular stock exchanges, just like any other stock or commodity. The stock prices of these companies are affected not only by blockchain technology but also by hype and other factors related to blockchain. 

Top Blockchain ETFs 2022  

Blockchain ETFs are one of the ways to get exposure to cryptocurrency and blockchain technology without investing in cryptocurrencies. These funds track stocks of companies that invest in blockchain technology and are also available in the traditional markets.  

The blockchain ETF marketplace is still a niche area, and only a handful of funds are focused on the blockchain space. Remember that there is no public company that is only focusing on blockchain, and most of these ETFs have stocks that overlap with other funds. 

We’ll mention some of the most popular blockchain ETFs to illustrate what kind of assets these funds can hold. 

Invesco CoinShares Global Blockchain UCITS ETF 

Invesco CoinShares UCITS ETF is an Exchange-Traded Fund incorporated in Ireland. The Fund's investment objective is to attain the performance of CoinShares Blockchain Global Equity Index ("the "Reference Index") without the fees and expenses. 

Invesco Elwood Global blockchain UCITS ETF 

Invesco Elwood Global blockchain UCITS ETF seeks to capitalize on the upside growth potential for companies using blockchain technology. These potentials are often hidden in companies that most investors would not notice. The ETF tracks the performance of the Elwood Blockchain Global Equity Index (BLOCK). It was created by an investment firm that specializes in providing institutional investors exposure to digital assets.  

Bitwise Crypto Industry Innovators ETF (BITQ) 

The Bitwise Crypto Industry Innovators ETF (BITQ) is a passively managed fund that tracks the Bitwise Crypto Innovators 30 Index's performance. This index contains 30 stocks from companies that are heavily involved in crypto markets and blockchain technology, such as mining equipment suppliers, financial services companies, and crypto mining outfits. 

A company must have at least 75% of its revenues in cryptocurrency, or 75% of its net assets in Bitcoin or other crypto assets to be included in the Bitwise Crypto Innovators 30 Index. The index accounts for 85% of BITQ holdings. The remaining 15% includes large-cap stocks that are tangentially engaged in crypto or have at least $100,000,000 in Bitcoin, Ethereum, or another crypto asset. 

BITQ's top holdings include Silvergate Capital, MicroStrategy, and Coinbase.  

GlobalX Blockchain ETF 

The GlobalX Blockchain (BKCH) was created in mid-2021. It allows investors to have exposure to a whole range of blockchain stocks through one investment. 

GlobalX Blockchain ETF charges an expense rate (an annual investment fee) of 0.50%. This is reasonable for a targeted fund. It can invest in 25 companies, including Riot Blockchain stock, Coinbase and Hive Blockchain stock, and others that aren’t listed on U.S stock exchanges. This ETF is a good option if you believe in blockchain technology's long-term potential but don’t want to try and pick winners. 

Amplify Transformational Data Sharing ETF (BLOK)  

Amplify Transformational Data Sharing ETF was launched in January 2018, and it was the first exchange-traded fund to invest in blockchain technology. BLOK is actively managed, and it aims to invest only in shares of companies using or developing blockchain technology. 

BLOK targets cryptocurrency exchanges and companies involved in crypto mining as well as developers of new blockchain apps. Some of the top holdings of the fund include Nvidia, Cooinbase, and Silvergate Capital.  

How to Invest in Blockchain Shares and Funds 

Blockchain technology is not limited to cryptocurrencies, and it has many other applications, such as international payments, decentralized finance, auditing, and regulatory compliance. Here are some of the most popular ways to invest in blockchain shares and blockchain ETFs. 

Please note that some of the blockchain shares and funds are high-risk investments and may not suit every investor.  

Buy and Hold 

The most common strategy for investors is the buy-and-hold strategy, which implies that the Blockchain shares, and ETFs are held for longer periods. Those who apply this strategy believe that the long-term gains from investing will outweigh the volatility of the asset.  

The buy-and-hold strategy is simple. Simply pick a stock, ETF, or mutual fund and buy it. Then, hold it for many years. You could also keep it for many decades. Investors rely on fundamental analysis when choosing their assets for the buy-and-hold strategy. Ideally, you would look for blockchain stocks that are low in price relative to the company's fundamental value. 

This strategy is regarded as passive investing, and it is particularly useful for markets in which the “time in the market” is more important than “timing the market”. 

Trading through CFDs 

Trading blockchain stocks CFDs (contracts for difference) allows investors to gain exposure to price movements without owning the underlying assets. CFDs can be described as contracts between two parties (i.e., the provider and you). They require the provider to pay the difference in exit and entry prices. Because its price is determined from the price of an underlying asset, it is considered a financial derivative instrument. CFDs have made trading accessible to all investors, due to the low entry cost and straightforward mechanism.  

With CAPEX you can trade CFDs on +20 top cryptocurrency with zero commission and tight spread, as well as +2.000 international stocks, commodities, funds, and currency pairs within a single trading account.  

Blockchain Future ThematiX 

Blockchain Future ThematiX is a blended fund that includes top chip stocks. These blended funds allow investors to diversify among the most popular investment styles within a single portfolio. Blend funds also allow investors to take advantage of both the capital gains potential and the stability and dividend income of the value segments. 

Blend funds were created to give investors the benefits of both value and growth investing. Value stocks seek to make a profit from investments that are undervalued based on their fundamental characteristics. Growth stocks seek to make a profit from companies that have substantial capital growth potential in terms of earnings or capital gains. Blend funds combine both types in one portfolio. 

Blend funds can be managed using a variety of strategies, so investors should make sure they are clear about their allocation. Blend funds can be used to cover a wide range of investment options.  

With CAPEX, you can trade the Blockchain Future ThematiX, which consists of 55% AMZN, 21% NVIDIA, 11% MasterCard, 4% IBM. 4% Square, 3% CME, 2% DocuSign Inc.  

Final words  

Blockchain technology is a promising area of innovation that can be applied to many sectors. Investors around the globe are intrigued by its potential after witnessing its tremendous growth over the last decade. Of course, the rise of cryptocurrencies such as Bitcoin and Ethereum has fueled the interest in the technology behind the blockchain.  

Anyone looking to invest in blockchain technology should research cryptocurrencies and other blockchain and crypto-related companies. However, investing in a Blockchain ETF can be a worth checking strategy since it is giving larger diversification than investing individually in blockchain-related businesses, as they cover a wider range of companies. 

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