The global cryptocurrency market is growing rapidly. It is projected to be worth nearly $5 billion by 2030. A lot of factors are playing a role in this growth, including new advances in blockchain and the introduction of new blockchain ETFs.
Blockchain ETFs are among the most popular new ways for everyday investors to diversify their portfolios with blockchain and cryptocurrency investments. However, many are left asking what exactly are blockchain ETFs, and why should I be buying them?
Many Different Ways Now Available to Invest in Blockchain Technology
Today, there are many different ways that investors can incorporate cryptocurrencies into their portfolios. The traditional method has always been the direct buying and selling of specific cryptocurrencies like Bitcoin and Ethereum.
These methods have been made possible due to blockchain technology, which has helped spur the creation of new cryptocurrencies like tether. This has been highly beneficial for savvy investors.
This direct exposure to cryptocurrencies is a simple matter of buy low and sell high. However, this opens traders up to significant risk, given how turbulent individual cryptocurrencies can be. It also requires at least a little technical know-how to safely and securely purchase, hold, and sell cryptocurrencies directly.
Buying cryptocurrencies as a speculative investment is just one of the ways that traders can invest in blockchain technology. Alternatively, they can purchase stocks in crypto and blockchain companies. The April 2021 public listing of cryptocurrency exchange Coinbase on the Nasdaq Stock Market is one major example of investing in blockchain technology through a company’s stock.
Investors can also incorporate blockchain exposure into their portfolio in smaller degrees by investing in companies that are only partially or tangentially tied to blockchain technology. Major stocks like Microsoft, Visa, PayPal, and Square all have various blockchain involvement that provides exposure while maintaining security through their strong core business operations.
Of course, picking stocks isn’t for everyone. In fact, it’s not a recommended way to invest for anyone but professional traders. Most everyday investors instead rely on various types of funds that group investments based on a number of factors. Among these are blockchain ETFs.
ETFs Provide Attractive Investment Opportunities Across All Industries
Blockchain has been highly important to the future of the economy. It has led to a number of new developments, including blockchain ETFs.
Exchange-traded funds (ETFs) aren’t anything exclusive to blockchain technology. They’re just another type of financial instrument that investors can purchase, designed to provide both growth and security. Blockchain or otherwise, they’re some of the most popular investment assets available today.
An ETF will be made up of investments in a variety of stocks and other assets. The specific assets are chosen to represent some commodity, technology, or strategy. One might imagine investing in every company across a specific industry in order to capture the growth of that industry but remain secure against the failings of individual companies.
ETFs are in some ways similar to investing in traditional mutual funds or other combined assets but generally offer reduced expense ratios. They also offer more variety and versatility, allowing investors to implement more diverse investment strategies.
Blockchain ETFs Provide Excellent Growth While Mitigating Crypto Risks
A blockchain ETF is, quite simply, an ETF that tries to capture the growth of blockchain technology. These instruments accomplish this by selecting a variety of companies with varying levels of blockchain involvement.
This can include both large-cap stocks like Microsoft and Visa, which deliver security and steady growth, and smaller stocks that are more directly tied to blockchain technology. With this strategy, investors can profit as blockchain technology grows without taking on the excessive risk of any individual blockchain venture failing.
There are many different blockchain ETFs available today, with varying levels of blockchain exposure. While some take more high-risk and potentially high-reward strategies than others, they are all relatively secure compared to investing directly in cryptocurrencies or even individual stocks.
The highest performing ETFs in this category have done remarkably well, with 3-year returns ranging from 50 to 150%. This is performance far beyond what most investments could possibly claim to offer. On average, a typical ETF might have been expected to deliver a 3-year return of 30 percent.
A key point to remember here is that these ETFs provide excellent security. While it’s true that an expertly timed investment in Bitcoin could have far overshadowed these gains, there are many investors out there who have incurred major losses trying to time the market. In many cases these losses are incurred when uneducated investors fall prey to various schemes like “Bitcoin Prime” which was recently labeled as a “blacklisted scam” by review website ScamCryptoRobots.com
Choosing the Right Way to Handle Your Blockchain Investments
Blockchain ETFs are just one more way that you can choose to invest in blockchain technology. Like most ETFs, they could find a place in essentially any portfolio. Those considering whether to buy cryptocurrencies directly or mitigate risks with an ETF are going to have to make their decision based on their own investment goals and risk tolerance.