‘Bitcoin Stocks’: Everything You Need to Know about Blockchain Stocks, Funds and Alternatives
As Bitcoin experiences mass awareness, interest in ‘Bitcoin’, ‘Blockchain’ stocks seems to be rising at a similar rate. There are already multiple stocks in the market that focus exclusively on bitcoins and/or other cryptocurrencies. We are also seeing some traditional companies pouncing on the ‘bitcoin’, ‘blockchain’ hype and taking decisions that has little to do with their core business but a lot to do with being perceived as a ‘blockchain stock’. Early in January, shares of Eastman Kodak nearly tripled in price after announcing that they will launch a newly created digital currency called KodakCoin. Many observers have called it a ‘desperate attempt’ by Kodak to avoid its near imminent bankruptcy. Back in December last year, Long Island Iced Tea Corp, a company that makes… iced teas, saw their share price rise by almost 300% after they changed their name to Long Blockchain! The move helped them avoid delisting from Nasdaq, which requires a company to maintain a minimum market value of $35 million.
In any case, we have covered all the possible stocks, funds and other investment vehicles you could consider if you ever thought about ‘bitcoin stocks’.
Bitcoin Mutual Funds (Funds exclusively invested in Bitcoins)
There are currently only two mutual funds that exclusively invest in cryptocurrencies; one is the Bitcoin Investment Trust traded at the NYSE, and the other is the France-based TOBAM Bitcoin Fund available on a private placement basis.
The Bitcoin Investment Trust (OTC:GBTC)
This mutual fund was established in late 2015 and started as an open-ended trust that invested exclusively in bitcoin. This fund exclusively derives its value from the price of Bitcoin. Interestingly, the company does not generate any income and will regularly distribute/sell bitcoins to pay for its operating expenses, which will ultimately decrease the amount of Bitcoin (initially 0.1 Bitcoins) represented by each share.
If we take a look at The Bitcoin Investment Trust chart, it’s pretty apparent that this fund has been a huge earner for investors (much like the the Cryptocurrency that it follows.) There was a bit of a dip in January, but the price of Bitcoin is looking as if it will recover, as will the price of this mutual fund. So, if you’re interested in buying in to Bitcoin, but don’t currently have enough money to buy the currency, consider looking in to this fund as it trades for a fraction of the price.
As an interesting note, 43% of the outstanding shares of GBTC are owned by two mutual funds. Kinetics Asset Management owns 27.7% of the shares and ARK Investment Management owns 15.2%. Both of these companies are heavily involved in the crypto wave and we’ll touch a little more on them later on in the piece.
TOBAM Bitcoin Fund
TOBAM is a French asset management firm that launched Europe’s first Bitcoin Investment Fund. The fund is open to “qualified and institutional investors wanting to gain exposure” to bitcoin. The TOBAM fund is interesting because it recognizes the volatility and risk currently surrounding the trading of cryptocurrencies and plans to use some of its core competencies such as its “founding pillar” research and its in-house computer power and it to help mitigate some of the risk that investors will have to face.
The New York Stock Exchange filed to have to ETFs launched in January of 2018, which brings cryptocurrency in to the mainstream for investors. Both of these newly listed ETFs will focus on Blockchain technologies and each owns shares of an increasing number of companies that are focusing heavily on the use of Blockchain. There are several other ETFs that own shares of companies involved in the crypto currency space (E.g. The ARK Investment Management owns a considerable portion of GBTC), but these are the first ETFs to focus entirely on own shares of companies heavily involved in Blockchain Technologies.
The Reality Shares Nasdaq NexGen Economy
BCLN is a non-diversified fund with the investment objective of tracking & measuring the returns of companies that commit material resources that will help innovate and utilize block chain technology for their own use or for the use of other block chain companies.
Amplify Transformation Data Sharing ETF
BLOK is the second block chain ETF that was recently made available to investors and essentially has the same investment objective as BLCN. That is to measure the returns of companies involved in Block chain activities. BLOK is committed to selected the best block chain publicly traded companies across a variety of sectors, which could lead to strong and promising returns for investors.
Here is a diagram that shows the diversification of the types of companies that BLOC tracks. This is a particularly interesting chart because it shows how disruptive that block chain has the potential to be. In its infancy, block chain and block chain technologies are already reaching in to a myriad of sectors. In several years, it is entirely possible that there won’t be any industry that isn’t affected by this technology. So, now is a great time to get in.
Aside from these two recently added ETFs there are several other ETFs that have been involved in investing in Block Chain. As mentioned early, Kinetics Asset management owns 27.7% of GBTC. Not only does that particular ETF own GBTC it is what Kinetic calls their “internet fund” with its objective being to invest in “undervalued companies that are participating in the growth of the company. This fund has net assets totaling in at $168.9 Million, but although a fairly large fund, it is not entirely geared towards tracking block chain companies, which could be limiting to investors returns at this stage in the game.
The second ETF fund that we mentioned early was ARK Investment Management, and similar to Kinetic this ETF doesn’t specialize in tracking block chain companies. What ARK’s ETF does is tracks companies that are “poised to benefit from disruptive innovation.” The three areas that they focus on while keeping that in mind are industrial innovation, genomics or Web x.0. ARK’s is an attractive ETF as far as growth goes as its had a steady growth other past several years since its beginning in 2014. But it doesn’t strictly track block chain companies, which is one of the most attractive and affordable spaces right now for investors.
So, why consider investing in an ETF that tracks “Block Chain” Companies? Well, there’s a few major reasons why you might consider doing that. The first reason is that by the year 2027
10% of the Global Economy is predicted be stored in block chain.(1) This is significant because it represents a clear shift away from traditional currency holding and the real transformative power of the Block Chain. The second reason is that by 2022 $15-$20 Billion in cost savings from infrastructure will be had by banks.(2) This is another notable projection, because one of the big selling points of block chain and block chain technologies is that it will be faster and cheaper for banks and individuals. If these projects are true, institutions could be seeing the saving in the very near future. And lastly, 84% of executives believe that the internet of things can generate service based income streams. If the majority of executives are right then this means that there will be a need for cryptocurrencies on the block chain in the future.
Listed Companies with Heavy Exposure to Cryptocurrencies
Now that we’ve covered the Block Chain ETFs I think it’s important to cover some of the companies that are behind the innovation that the ETFs follow. I plan on only focusing on a few of the majors, but as we saw from the BLOK ETF chart there are many companies and industries getting involved in block chain. Here’s the list I complied.
Overstock is an interesting company to consider if you believe in the staying power of cryptocurrencies. The company has developed its own block chain business in Medici Ventures and has also been accepting bitcoin as payment through its online platform and retaining some of it. On top of that the owner and founder Patrick Byrne has dreams to transform the business in to a strictly block chain based company. There have been murmurs of Overstock selling of its retail portion of the business and focusing strictly on is block chain assets.
RIOT is an interesting company because it is a great example of a company that has completed shifted its business model to shirt towards focusing on block Chain technologies. Previously dubbed Bioptix and focusing on diagnostic equipment in the biotech industry, RIOT now exclusively focuses on block chain technologies and investments. RIOT recently invested in Verady, a company that provides verification for block chain based assets.
NVIDIA & AMD
(NVDA) & (AMD)
NVIDIA & AMD are both crypto currency mining companies, which create value through developing technologies that actually mine for bitcoin. The investment opportunity here isn’t that high because price increases usually only happen when there is new information out about the company, which rarely happens. Instead I suggest that Investors focus on lesser known companies that have a higher chance for potential gains.
Private Investment Funds
Due to the increasing size of the crypto market there is inevitable many private investment funds that have decided to enter the game. Below I will list a few of the most notable ones.
Polychain Capital Fund
The Polychain capital fund was founded in 2016 and currently has 102.2 million in block chain assets. These assets include various cryptocurrencies, assets and other digital tokens.
The Logos Fund
As the world’s first “bitcoin mining fund” The Logos Fund specializes in crypto mining. Aside from crypto mining it also offers buy-and hold- investing. The fund currently has about 100 million in estimated funing and was created by Marco Streng, the founder of Genesis Mining, the hosted cloud mining company.
Pantera ICO FUND LP
This fund is only open to those in the United States. It is headed by the CEO of Pantera Dan Morehead and the co-founder of Augur Joey Krug. This fund focuses solely in tokens that power public block chain protocols.
The Futures Market
Another potential way to invest in and capitalize on the block chain wave is to get involved in futures trading. As we mentioned in a previous article the bitcoin futures market is an increasingly attractive market to get in to for investors. The volatility surrounding cryptocurrencies make for potentially huge gains or huge losses, but nonetheless an exciting way to get involved in crypto.
Digital Asset Management Platforms for Cryptocurrencies
Apart from mainstream investment vehicles like stocks and mututal funds, an investor could also consider using the new digital asset management platforms like ICONOMI and Melonport and participate in managed funds investing in various digital assets and combinations of digital assets (ICONOMI calls them Digital Asset Arrays).
With the future being entirely online it’s going to be vitally important that there are reliable companies that are able to manage those assets. That is where a company like Iconomi (ICN) comes in. Currently, Iconomi is the only that offers all four of the digital asset generations. Iconomi is the first to market in this space, so as an investor you might consider taking a serious look at this company.
Melonport is a more decentralized platform than ICONOMI but a lot less hyped. But the team and technology behind the project seem very robust. Both ICONOMI and Melonport enables first time cryptoinvestors to buy into funds managed by professional fund managers and not jump into the daunting world of crypto-trading right away by themselves.
As an investor, there are many ways in which you can get involved in the block chain market. Whether its investing in mutual funds, ETFS, companies or private investment funds there is a way you can find that feels comfortable for you. But remember, the important thing about investing in crypto currencies is to gather as much information as you can. The more information that you have the better decisions that you can make about what the best investment is. Up until this point the block chain market has been extremely emotional, but moving forward it is important to evaluate block chain companies just as you would any other company that you are considering putting your money in to.