By Tezcan Gecgil, PhD
2020 is no ordinary year. As global citizens get used to the “new normal,” i.e., life in the days of Covid-19, the world of money and finance is also fast transforming. Digitized assets and new instruments and making headlines regularly.
As a result blockchain has received a significant attention as an emerging technology. Similarly, cryptocurrencies such as Bitcoin, Ethereum, or Ripple have also attracted widespread attention since Bitcoin was created in 2009.
Cryptocurrencies were among the first application of this technology. However, the blockchain technology that these cryptocurrencies are based on has many diverse applications beyond this popular market.
Simply put, Blockchain is a record-keeping technology that can be described as a public digital ledger. While in 2018, the global blockchain market was valued at around $1 billion, it is expected to reach $40 billion by 2025.
Companies that utilize blockchain technology offer investors growth potential without the volatility seen in cryptocurrencies.
Here we’ll take a closer look at the emerging blockchain industry and introduce an exchange-traded fund (ETF) to consider.
Blockchain Technology Has Diverse Applications
Blockchain is essentially a public ‘document’ where all committed transactions are stored in a list of blocks, which form a chain and contains a verifiable record of every single transaction made. Blockchain is immutable, meaning a transaction cannot be tampered with once entered.
Within the past decade, peer-to-peer digital currencies such as Bitcoin have become the most famous examples using blockchain technology. In the future, blockchain applications are likely to impact a wide range of industries like agriculture, asset management, insurance, healthcare, Internet of Things, retail and supply chain management, to name a few.
For example, the Energy Web Foundation is working with energy giants, BP (NYSE:BP) and Royal Dutch Shell (NYSE:RDSb), to explore how blockchain technology can be used in the energy sector.
Several big pharma and biotechnology companies, such as AbbVie (NYSE:ABBV), Pfizer (NYSE:PFE) and GlaxoSmithKline (NYSE:GSK), have been collaborating to promote and cut the cost of drug discovery through increased use of blockchains.
Some global banks and financial institutions, including JPMorgan Chase (NYSE:JPM), HSBC Holdings (NYSE:HSBC) and Visa (NYSE:V), are researching the potential use of blockchain-based banking solutions.
Grocery stores and food manufacturers, including Walmart (NYSE:WMT) and Unilever (NYSE:UN), are exploring how blockchain could help them keep track of food in the supply chain.
With so much potential for how blockchain technology can benefit industry giants, here’s a blockchain ETF should be on your radar:
Amplify Transformational Data ETF (BLOK)
- Current Price: $25.25
- 52 Week Range: $13.04-$25.34
- Dividend Yield:1.53%
- Expense Ratio: 0.70% per year, or, $70 on a $10,000 investment
The Amplify Transformational Data Sharing (NYSE:BLOK) invests at least 80% of net assets in shares of companies that are active developers and utilizers of blockchain technologies.
The top five sectors (by weighting) are Software & Services (30.9%), Diversified Financials (20.5%), Media & Entertainment (19.9%), Retailing (9.8%) and Banks (8.1%).
BLOK, whose net assets are about $112 million, has 55 holdings. The top five companies are Galaxy Digital Holdings (TSX:GLXY), Square (NYSE:SQ), Gmo Internet (T:9449), Z Holdings (OTC:YAHOY) and Kakao Corp (KS:035720). These five firms make up close to 24% of the fund’s total holdings.
Year-to-date, BLOK is up over 34%. However, since the lows seen in March, the fund has increased by over 90%, so $1,000 invested in early spring would now be worth around $1,900. On Aug. 26, BLOK hit an all-time high of $25.34.
The companies in the fund mainly come from Asia-Pacific (45.9%) and North America (43.5%). Potential investors should study the companies in the fund as well as their products and services carefully before committing new capital into BLOK.