According to analysts, Bitcoin and other cryptocurrencies are among the most volatile securities trading today. Remarkably, a safer way to invest in cryptos and blockchain technology firms is through exchange-traded funds.
As we know, the Amplify Transformational Data Sharing ETF BLOK is the largest ETF focused on cryptos and firms that use or develop blockchain technology. Notably, it holds $1.3 billion in assets and is actively managed. Meanwhile, the second-largest ETF is the Siren Nasdaq NexGen Economy ETF BLCN, which holds $291 million in assets. Both ETFs were established on January 17, 2018.
However, it would help if you considered the risks of bitcoin and other digital currencies beyond volatility. For instance, if you hold BTC in a digital wallet, ensure you don’t lose your password. In 2012, one investor lost access to an account with 7,002 bitcoin. That equates to nearly $321 million, based on bitcoin’s price of 45,837.40.
There have also been problems for individuals willing to trade cryptocurrencies on days of high volatility and reports of hacked accounts and poor customer service at Coinbase Global Inc., with customers unable to recover lost BTC.
Coinbase has announced that only 0.01% of its users have been affected by account takeovers.
The dominant cryptocurrency, Bitcoin, has had the best performance on the chart, increasing 322% since January 17, 2018, with BLOK next, returning 159%, followed by BLCN, at 104%.
From January 17, 2018, bitcoin was down 71% through December 14, 2018. For the two years, it was down 18%. Meanwhile, BLCN returned a positive 14%, and BLOK was up 1%. The ETFs have been less volatile.
Morningstar rated BLOK four stars (out of five), while BLCN has a three-star rating. BLOK has more than doubled the return of SPY and has outperformed QQQ handily since it was established.
Earlier in 2021, the SEC permitted BLOK to hold shares of the Grayscale Bitcoin Trust
Earlier in 2021, the Securities and Exchange Commission permitted BLOK to hold the Grayscale Bitcoin Trust shares, which have a market cap of $6.6 billion. It has been a common way for investors and traders to trade with BTC indirectly. However, it has its own risks, as its share price at times can grow to a very high premium over the trust’s net asset value. This indicates that GBTC has an extra layer of volatility on top of BTC’s price.
Christian Magoon, Amplify CEO, announced that GBTC has traded at a premium as high as 70% over NAV. However, recently, it has traded below the NAV.
Magoon announced that it led BLOK to sell out of its GBTC position completely. It now owns shares of Canadian exchange-traded funds that invest in BTC and trade close to NAV.
Moreover, BCLN manages to have more holdings than BLOK — 69 stocks at the end of Q2. Remarkably, BLOK’s 10 biggest holdings make up 45% of the portfolio, while BLCN’s 10 largest accounts for 21%.