3 MAY, 2021
By Ana Andrés
The popular investment products known as ETFs (Exchange Traded Funds), whose use has gained huge popularity in recent years, offer investors to gain exposure to indices or sectors, usually assuming a great diversification. In this article, the reader will find ETFs focused on blockchain technology.
The blockchain industry has evolved at a very fast pace over the last 2 years, but in reality it is just beginning to develop its full potential, which generates interesting opportunities for investors.
Blockchain technology is already present in many economic activities, such as energy, financial services, means of payment, consulting, communications services… There are sectors that have made extraordinary progress in this regard, such as containerized freight transport, where 50% of global traffic is already managed through blockchain. So the potential for finding investment opportunities is immense.
Just two years ago, Invesco decided to launch the first European ETF to offer investors exposure to this technology. This is not an easy target, because the few companies whose business focuses exclusively on this technology tend to be either small or overexposed to cryptocurrency prices. The challenge facing any investor wishing to gain exposure to blockchain is knowing how to do so effectively. There is no "blockchain sector" to invest in as such, but there are many companies that have the potential to generate real returns from the use of blockchain technology at different levels, albeit spread across multiple sectors and ranging from start-ups to large conglomerates. This segment is where the Invesco Elwood Global Blockchain UCITS ETF is focused.
To make it easier for our clients to invest in this technology in a transparent, efficient and cost-competitive way, we partnered with Elwood Asset Management, a leading digital asset management firm and one of the world's leading blockchain experts. This firm builds a specialized index (which is the ETF's benchmark) that offers exposure to global companies participating in the blockchain ecosystem, but also includes companies that are well positioned to benefit from the potential revolution that this technology may bring.
The Invesco Elwood Global Blockchain UCITS ETF was the first exchange-traded fund in Europe to invest in blockchain and today, two years into the ETF's life, it is the largest, having surpassed $1.2 billion in assets. At a cost of just 0.65% per annum, the ETF provides access to cryptocurrency mining companies, token investments, payment systems and financial services, and blockchain-based technology, communications or consulting solutions.
Its performance over these two years has also been outstanding. Investors' interest in having exposure to one of the technologies of the future has led to a strong rebound in share prices: the ETF has more than tripled² its value in its two years of existence. Its volatility has remained in line with that of the main world indexes, far below the volatility levels of cryptocurrencies.
The WisdomTree Bitcoin ETP provides investors with a simple, secure and cost-efficient way to gain exposure to the most liquid and popular cryptocurrency, Bitcoin. The ETP allows investors to access Bitcoin without the need to hold the cryptocurrency directly, store private access keys or interact with the blockchain or digital currency infrastructure in any way. Investors also receive access to institutional-grade storage solutions without needing to set it up with a custodian themselves.
To ensure the highest level of security, WisdomTree employ institutional-grade digital currency custodians who maintain highly secure cold storage facilities. In March 2021, WisdomTree onboarded Coinbase as a custodian for the WisdomTree Bitcoin ETP. The multi-custodian model builds on WisdomTree’s robust operating set up, adding greater flexibility and enhanced security to investors. The approach highlights WisdomTree’s focus on innovations which benefit investors.
WisdomTree Bitcoin has over $380m in assets under management and achieved its one-year track record in December 2020.
Bitcoin has become a hot investment topic, growing in popularity amongst professional investors in 2020 and 2021. A maturing market ecosystem, positive news from corporations and significant price increases have helped improve sentiment prompting investment managers to take a closer look at the asset class.
WisdomTree Bitcoin is now passported inAustria, Belgium, Denmark, Finland, France, Germany, Italy, Ireland, Luxembourg, Netherlands, Norway, Spain and Sweden.
This was the first Exchange Trade Product to be traded on the SIX Swiss Exchange, the Swiss market. Launched by Bitcoin Capital, it was one of the most innovative products, available to both institutional and retail investors. It is managed by FiCAS, a pioneer in the management of these new cryptocurrency investment products.
However, this product differs in that the management is active, with the ability to react to market movements and available information. For all these reasons, this is one of the most interesting alternatives when investing in Bitcoin.
By Alexis Bienvenu
By Duncan Lamont