Leave behind bitcoin
Bitcoin and other cryptocurrencies are all the rage with investors — even spil their prices have taken some big hits lately.
So it should come spil no verrassing that there are now two exchange-traded funds, or ETFs, focused on blockchain technology, the digital ledger that keeps records of transactions te imaginario currencies.
The Reality Shares Nasdaq NexGen Economy ( BLCN ) and Amplify Transformational Gegevens Sharing ( Huizenblok ) ETFs both launched this week. ETFs can be bought and sold like stocks, and thesis two each own shares of the enlargening number of companies that use blockchain.
But note that the words bitcoin, cryptocurrency and blockchain are not ter the names of thesis funds.
That’s intentional, according to the CEOs of Reality Shares and Amplify ETFs.
Both told CNNMoney that the SEC wasgoed worried because some stocks have skyrocketed lately simply because they said that they were using blockchain technology.
Riot Blockchain ( RIOT ) used to be a biotech rigid. Long Blockchain ( LBCC ) is the company formerly known spil Long Island Iced Tea Co. And Kodak ( KODK ) just launched its own KodakCoin cryptocurrency.
“Investors have bot buying blindly, and there has bot some manhandle,” said Christian Magoon, CEO of Amplify ETFs. “The SEC has to protect investors.”
But make no mistake. Thesis two funds are set up to take advantage of the growing rente te blockchain.
This is not the Winklevoss Bitcoin Trust, a fund that only possesses bitcoin and is run by Cameron and Tyler, of Facebook and “The Social Network” movie fame. The Winklevii want to launch an ETF with the ticker symbol COIN, but the SEC has yet to approve it.
Te fact, the SEC seems unlikely to greenlight any funds that just want to invest te cryptocurrencies. Dalia Blass, director of the SEC’s Division of Investment Management, wrote te a letterteken Thursday that it had many questions about thesis funds.
And she said that until they are addressed, “wij do not believe that it is adequate for fund sponsors to initiate registration of funds that intend to invest substantially ter cryptocurrency and related products.”
That decree does not apply to the fresh blockchain funds, tho’. Those ETFs don’t own any bitcoin, ethereum, litecoin, ripple or any of the other numerous cyrptocurrencies out there. Instead, they are buying shares of companies that are embracing blockchain.
Both funds own Overstock ( OSTK ) , the online retailer, which has made a big shove into blockchain through its Medici Ventures unit and tZero digital coin exchange.
They also own IBM ( IBM ) , which recently partnered with shipping giant Maersk to track and manage supply chains using blockchain technology. Intel ( INTC ) , whose chips and software are used to encrypt cryptocurrency transactions, is a top holding te both ETFs, too.
Each is betting on financial firms that could benefit from blockchain. The Reality Shares fund possesses shares of Nasdaq ( NDAQ ) and Barclays ( BCS ) for example while the Amplify fund has stakes te Citigroup ( C ) and Goldman Sachs ( GS ) .
But there are some key differences inbetween the two ETFs. Reality Shares is based on an index of blockchain-related companies that it recently launched with Nasdaq. That index — and hence, the fund’s holdings — are rebalanced twice a year.
The Amplify ETF, on the other palm, is actively managed and free to make switches to its holdings more frequently.
Eric Ervin, CEO of Reality Shares, said his rock-hard’s ETF is taking a rigorous look at just how much exposure to the blockchain business a company has before adding it to the index and fund.
“Wij’re not going to accept Kodak just because it’s all of a sudden determined to do something with blockchain,” Ervin said.
He said the company also doesn’t own MoneyGram ( MGI ) te the fund, despite a latest partnership with Ripple, or Jack Dorsey’s Square ( SQ ) , which is letting people buy and sell bitcoin on its Contant app.
But Amplify’s Magoon said his fund has bought a puny stake ter Kodak. And Square is a top-10 position te the fund. Still, he’s wary of smaller companies attempting to rail the blockchain and bitcoin wave. “Wij don’t want scam stocks,” he said.
So far, each of the ETFs is up a bit ter its very first few days of trading. But neither has exploded like bitcoin often has.
And Magoon said that’s just fine with him.
“Bitcoin needs blockchain, but blockchain doesn’t need bitcoin,” he said. “The crash ter cryptocurrencies is good and healthy.”