Bitcoin is in rally mode. With a market capitalization of about $203 billion, the largest digital currency is nearly as big as Coca-Cola (KO) and has more than doubled since March.
Bitcoin ebullience, as it has in bygone eras, is giving rise to blockchain assets, including the Reality Shares Nasdaq NexGen Economy ETF (BLCN). Up 27.53 percent year-to-date, BLCN hit an all-time on July 29, extending a run in which the exchange traded fund is higher by 16.22 percent over the past month.
BLCN tracks the Reality Shares Nasdaq Blockchain Economy Index. That index “is designed to measure the returns of companies that are committing material resources to developing, researching, supporting, innovating or utilizing blockchain technology for their use or for use by others,” according to Reality Shares.
Blockchain serves as the backbone of digital currency transactions and while there are often correlations between cryptocurrencies and blockchain assets, there’s much more to the latter’s story, chapters in which are accessible via BLCN.
Betting on BLCN
An old critique of blockchain ETFs is that these are tech funds in disguise. That bum rap probably isn’t applicable anymore, at least not in the case of BLCN. For its part, the Reality Shares fund is compelling because a case can be made it’s actually a fintech ETF because the technology and financial services sectors combine for almost two-thirds of its weight.
Overstock.com (OSTK) commands more than 10 percent of BLCN’s weight, but the allocates about five percent of its weight to fintech behemoths Square (SQ) and PayPal (PYPL). Given the growth trajectory of mobile payments, digital wallets and bitcoin transactions in these venues, BLCN’s fintech exposure is a source of allure.
For investors insistent on blockchain purity, BLCN does offer that, perhaps more so than rival funds in the category due to a multi-factor scoring system. BLCN is rooted in a “blockchain score” that focuses on a company’s blockchain technologies, blockchain technology development, industry group participation, economic impact, innovation, public references and research and development.
That is to say, BLCN is more than adequately levered to what are some compelling growth trends.
“Although the blockchain technology landscape can be confusing and is constantly changing, it is a technology that is almost certain to impact the business of most IT leaders in the next five years,” according to Gartner.
As just one example, Gartner notes that by 2023, blockchain will support the movement and tracking fo $2 trillion worth of global goods and services per year.
Don’t Wait for a Rebound
As is the case with so many industries, blockchain is being confounded by the coronavirus pandemic, but one wouldn’t know that by looking at BLCN’s recent price action. For example, the blockchain services market will slump modestly this year because of Covid-19 before resuming growth.
“The decline is mainly due to economic slowdown across countries owing to the COVID-19 outbreak and the measures to contain it, which impacted industries negatively and resulted in low investments on technology. The market is then expected to recover and reach $4.36 billion in 2023 at a CAGR of 60.01 percent,” according to Reportlinker.
The broader blockchain market could deliver compound annual growth of roughly 46 percent over the next five years. What’s impressive about those forecasts is the foundation in products and services growth, not dependence on bitcoin price action and that bodes well for BLCN.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.