What Is the Difference Between Blockchain ETFs and Bitcoin ETFs?

Despite the fact that bitcoin is gaining popularity among investors, Bitcoin ETFs are still a speculative bubble. Meanwhile, blockchain ETFs have been introduced to mainstream markets. In mass media and news stories, the words bitcoin and blockchain are frequently interchanged. As a result, many investors mistakenly believe that blockchain ETFs and bitcoin ETFs are the same.

Before deciding the instruments to monitor, it's critical to understand the discrepancies between bitcoin ETFs and blockchain ETFs. Bitcoin is a digital currency, and blockchain is the technology that powers it. Differentiation becomes much more important when it comes to investment securities.

Despite the fact that bitcoin futures are already available on the country's two largest exchanges, the cryptocurrency's legal status in a number of jurisdictions remains unclear. It is embroiled in a number of regulatory battles and is being investigated for encouraging criminal activity, such as money laundering.

Four blockchain ETFs are already available in regulated markets. The four were released in 2018, and their assets under administration totaled $278 million. Their cost-to-income ratios vary between 0.70 and 0.65%.

According to a Wall Street Journal post, investors poured $180 million into blockchain ETFs in the first two weeks after their launch. After October 2017, these ETFs have had higher trading volumes than other comparable instruments that have been launched.

What Are the Differences Between Bitcoin ETFs and Blockchain ETFs?

Exchange-traded funds (ETFs) that monitor the stock market prices of companies that have invested in blockchain technology are known as blockchain ETFs. Since blockchain is a technology, it is unrelated to any company or product.

The world of blockchain investing is expansive and does not confine itself to a single sector. IBM and Maersk, for example, have teamed up to bring blockchain to the freight industry. Similarly, Overstock has made blockchain investments through its Medici Ventures and zero digital coin exchange. These firms are well-liked by blockchain ETFs, which is unsurprising. Amplify ETFs' Amplify Transformational Data Sharing ETF (BLOK) and Reality Shares Nasdaq NexGen Economy (BLCN) ETFs monitor both companies.

The majority of bitcoin ETF applications filed with the SEC proposed using Cboe and CME futures contracts to monitor the price of bitcoin. In this model, ETFs own futures contracts that monitor the price of bitcoin.

The ETF plans, on the other hand, were rejected by the SEC due to “liquidity and valuation” concerns. At the moment, Bitcoin futures contracts have low exchange rates and liquidity. As a result, instead of leading, futures markets follow the unpredictability of spot exchange rates.

In their current form, blockchain ETFs are less risky than bitcoin ETFs. This is due to the fact that they are immune to bitcoin's wild price swings.

Wrapping Up

Since blockchain is a new technology, it does not yet have a wide demand. As a result, the ETF's stock prices are more vulnerable to causes that have little to do with or impact blockchain technology. The actions of regulatory authorities on bitcoin and cryptocurrencies would have a significant impact on bitcoin ETFs until they are introduced.

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