7 Best Blockchain ETFs Of June 2024

Blockchain forms the backbone of cryptocurrencies like Bitcoin and Ethereum, though its applications are much more far reaching, potentially revolutionizing any work that requires database recordkeeping and beyond.

For investors looking to capitalize on the exciting potential of this technology, blockchain exchange-traded funds (ETFs) let you easily invest in hundreds of companies pursuing blockchain-based strategies.

To guide your investments in this new category of ETFs, Forbes Advisor has reviewed the blockchain ETFs available on the market today and filtered them by total assets under management (AUM).

The Best Blockchain ETFs of June 2024

What Is a Blockchain?

Blockchain is a special kind of database that stores information in a way that makes it difficult to change or cheat the system. Here’s a breakdown of how it works:

Imagine a digital ledger: Traditionally, ledgers record transactions or events. Blockchains are essentially digital ledgers, but they’re shared across a network of computers instead of being held by a single entity.

Blocks Hold Information: Data on a blockchain is stored in “blocks” – like pages in a ledger. Each block contains information about the transaction, a timestamp, and a link to the previous block.

Cryptographic Chain: These blocks are chained together using cryptography, creating a tamper-proof record. If someone tries to change the information in a block, it would change the hash (unique digital fingerprint) of that block and all subsequent blocks, making it obvious something was tampered with.

Decentralized Network: Unlike traditional databases controlled by a single entity, blockchains are decentralized. This means copies of the ledger are spread across a network of computers, making it very difficult to manipulate the data.

Methodology

There are currently more than 25 blockchain and Bitcoin ETFs approved by the SEC for trading in the United States. This includes ETFs trading in both publicly-traded blockchain companies and Bitcoin futures.

Our methodology for selecting the best blockchain ETFs included in this list is the following:

• Avoid ETFs trading only in Bitcoin futures rather than publicly-traded blockchain companies.
• Filter the remaining ETFs for those with more than $15 million in total AUM at the time of compiling.

This process left us with seven funds. There are more blockchain ETF filings waiting for SEC approval. As the world of blockchain ETFs continues to evolve, we will offer a more comprehensive methodology that selects the best from an even larger universe of similar funds.

What Is Blockchain Technology?

Blockchain is a digital ledger that records data—frequently cryptocurrency transactions, though it can handle any type of data—and distributes it across a broad network of computer systems.

All of the nodes participating in the network hold identical copies of the digital ledger, which is a big reason why it can be difficult (but not impossible) to hack or cheat the system.

It’s helpful to break down the word blockchain to grasp how the system works.

Computers that participate in the network encode data—smart contracts, Bitcoin transactions or supply chain information for a logistics company, for instance—into “blocks” that are added to the continuously evolving digital ledger, aka the “chain.” As new blocks of information are added, duplicate copies of the entire database are updated on each node.

All nodes must confirm the legitimacy of new data before it is added to the chain. For some blockchains, that means a majority of nodes confirm that individual crypto coins have not been spent more than once. Alternatively for a logistics company, that could mean different nodes register or verify the receipt or dispatch of shipments.

What Are Blockchain ETFs?

Blockchain ETFs are thematic exchange-traded funds that own the stocks of companies that use or develop blockchain technology. They tend to invest in a wider variety of assets than Bitcoin ETFs or crypto ETFs, which focus more narrowly on tracking the price of individual cryptocurrencies.

While cryptocurrencies like Bitcoin and Ethereum are the most popular use for blockchain today, the technology offers the potential to serve a very wide range of applications that go well beyond crypto. Take Walmart’s Canadian division, which used blockchain technology to create an automated system for managing invoices and payments for its logistics partners.

The ETFs listed above invest in hundreds of different companies. They can be broken down into a few broad categories:

• Companies that own cryptocurrency. Firms like MicroStrategy and Tesla have large amounts of Bitcoin and other digital assets on their balance sheets.
• Crypto exchanges and crypto miners. Coinbase is a leading cryptocurrency exchange, for example, while Marathon Digital is a Bitcoin mining company.
• Financial services firms. Galaxy Digital Holdings is one of a handful of companies that manages crypto assets that derive their value from blockchain.
• Tech companies. Microchip makers like NVIDIA Corp supply hardware that is widely used to support blockchain systems.

Benefits of Blockchain ETFs

Easy Access to Blockchain Investment: Compared to researching and buying individual stocks in blockchain companies, ETFs offer a simpler way to gain exposure to this industry.

Diversification: By holding a basket of companies, blockchain ETFs help spread out your investment risk. If one company performs poorly, the others can help balance things out.

Potential for High Growth: Blockchain is a young technology with the potential to disrupt many industries. This could lead to significant growth for companies involved in this space, which would be reflected in the value of the ETF.

Things to Consider Before Investing

• Volatility: The blockchain industry is still evolving, and its future success is uncertain. This can lead to fluctuations in the price of blockchain ETFs.
• Regulation: Governments are still figuring out how to regulate cryptocurrency and blockchain technology. Unexpected changes in regulations could impact the industry and the value of these ETFs.
• Fees: Like any ETF, there are fees associated with buying and selling blockchain ETFs. Make sure you understand these fees before investing.

Overall, blockchain ETFs offer a way to invest in the potential of blockchain technology without the risks of directly buying cryptocurrency or picking individual stocks. However, carefully weigh the risks and align them with your investment goals and risk tolerance before deciding if a blockchain ETF is the right fit for you.

Why Invest in Blockchain ETFs?

It’s a buzzy, exciting technology, but blockchain is only in the early stages of development. Cryptocurrencies have been making dramatic headlines for their outsized gains and tremendous losses, but more pragmatic blockchain applications have had a much lower profile.

Large, established public companies have dabbled in blockchain businesses while smaller, more focused firms have put blockchain and crypto at the core of their operations. In either case, there has yet to be a killer app that has made the case for blockchain as a core part of the future of business and technology.

This means investing in the stocks of just one or a few blockchain or crypto-focused companies is very risky. That makes choosing a diversified blockchain ETF a less risky way to get exposure to the industry. The blockchain ETFs on our list invest in dozens or even hundreds of stocks, providing plenty of diversification in a single fund.

Given how rapidly the blockchain space is evolving, choosing a blockchain ETF for your portfolio could be the best possible choice for investing in the industry.

There are a couple of reasons why you might consider investing in blockchain ETFs:

Exposure to Blockchain Growth: Blockchain technology has the potential to revolutionize many industries. By investing in a blockchain ETF, you gain exposure to a basket of companies involved in developing and using this technology. If blockchain takes off, the value of these companies could rise significantly, leading to gains for the ETF and your investment.

Diversification: Blockchain ETFs typically hold shares of a variety of companies across different sectors that are leveraging blockchain. This diversification can help spread out your risk. If one company underperforms, the others can help balance it out.

Easier Investment in Blockchain: Compared to directly buying individual blockchain companies, ETFs offer a more convenient and accessible way to invest. You don’t need to research individual companies or manage your own portfolio. You simply buy and sell shares of the ETF like any other stock.

Potential for Higher Returns: The blockchain industry is still relatively young and has the potential for high growth. This could translate to higher returns for investors in blockchain ETFs compared to traditional investments.

However, there are also some things to consider before investing in blockchain ETFs:

Volatility: The blockchain industry is still evolving, and its future is uncertain. This can lead to volatility in the prices of blockchain ETFs. Be prepared for potential ups and downs in your investment.

Regulation: The regulatory landscape surrounding blockchain is still developing. This could lead to unexpected changes that could impact the industry and the value of blockchain ETFs.

Underlying Asset Risk: Just like any ETF, the performance of a blockchain ETF is tied to the performance of the companies it holds. If these companies don’t perform well, the value of the ETF will suffer.

Fees: There are fees associated with buying and selling ETFs. Make sure you understand the fees before you invest.

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