With the rise of cryptocurrencies, a host of related industries have emerged as viable options for investors looking for long-term investments. ETFs (Exchange Traded Funds) are one of them. Blockchain ETFs are a type of exchange-traded fund that invests in companies that use blockchain technology. This is a relatively new concept, but one that is gaining ground. Blockchain-driven stocks operate or benefit from the development and application of blockchain technology. Investing in cryptocurrencies, as opposed to blockchain ETFs, is relatively straightforward. Investors choose a coin or token, and if they think it has potential, they invest in it directly and receive a digital asset of equal value in return.
In contrast, when investors invest in a blockchain ETF, they are not “buying” anything. The prospect of progress is what they invest their money in. Also, blockchain ETFs do not refer to the money of a certain company or product. Rather, it is all businesses that are connected to blockchain technology in some way or depend on it for profit.
There are other key differences between blockchain ETF and crypto investing. They are:
– Blockchain ETFs primarily track the stock prices of companies that have invested in blockchain technology in their fund.
– Blockchain ETFs buy shares of companies like any sector fund or thematic fund.
– Many blockchain funds do not buy crypto coins. In fact, the funds that buy these coins are crypto ETFs.
– Blockchain ETFs are a new phenomenon with only a few dozen such funds operating in the world.
– In their current form, blockchain ETFs are relatively less volatile than cryptocurrencies.
Blockchain is the underlying technology on which coins are exchanged and their records are maintained in a decentralized manner. For example, Bitcoin is based on the blockchain technology of the same name, and Ether, the coin, is based on the Ethereum blockchain.