Yesterday I detailed some of the ways an investor could invest in the crypto currency Bitcoin and the Blockchain technology that supports it. Read the article here>> I then attended a ceremony Monday afternoon at the New York Stock Exchange in which Greg King of REX Shares and Brian Kelly, hedge fund manager and CNBC commentator rang the closing bell to commemorate the launch of their new Blockchain ETF. I’m going to follow up today with an explanation of that investment strategy.
Many investors are interested in the concept and technology of Bitcoin, but don’t necessarily want to open a Bitcoin account (called a “wallet”) or trade Bitcoin futures because of uncertainty about price volatility. The price of the crypto currency in U.S. dollar terms has fluctuated significantly over the past year, going from $6,000 to almost $19,000 and recently settling back near $6,000. That’s probably an unacceptable level of volatility for most investment and retirement accounts.
One sound way to gain exposure to the concept without direct exposure to the price of the currency itself is to invest in the companies that produce the goods and services that support the decentralized distributed ledger called the Blockchain that underlies Bitcoin and other crypto currencies.
Initially developed to facilitate and document transactions in Bitcoin, the Blockchain has enormous promise to change the way information and transactional data are shared and stored. It has obvious applications in the business of financial transactions due to its speed and inherent security as well as its potential to remove the middlemen – and their added fees – from banking transactions and trading in securities like stocks, bonds and derivatives.
The legal and medical industries and countless others could also benefit form the speed and security of distributed ledger technology.
Proponents believe that the Blockchain will revolutionize our digital lives by reducing transaction times, improving security and reducing errors. True zealots believe it has the potential to be just as disruptive to the ways we transact business as the internet was in the early 1990’s and the rate at which it is being adopted does suggest that widespread acceptance could be just around the corner.
Brian Kelly is a CNBC commentator, hedge fund manager and author of the book Blockchain Big Bang. He is one of Wall Street’s foremost experts on crypto currency trading and the Blockchain. He recently partnered with REX Shares to create a BKC – The Blockchain equity ETF. (BKC - Free Report)
The concept of the ETF is to offer investors an actively managed basket of stocks in companies that are involved in various aspects of the nascent Blockchain industry. The fund invests in four main categories – Wall Street Disruptors, Crypto Miners and Traders, Enterprise Blockchain Leaders and Decentralized Internet Builders.
Just as is the case with index and sector ETFs, shares in BKC can be bought or sold just like any stock.
Current holdings in BKC include companies that are invested exclusively in Blockchain, including dedicated crypto stocks in Asia like Global Unichip and GMO Internet, hardware manufacturers like Micron Technology (MU - Free Report) and Nvidia (NVDA - Free Report) , both the Chicago Mercantile Exchange (CME - Free Report) and CBOE Global Holdings (CBOE - Free Report) and the investment bank Goldman Sachs (GS - Free Report) .
Kelly will manage the holdings actively, which makes the fund more agile than a passive ETF that holds only the exact components of an index.
When asked about the role he sees BKC playing in an individual investor’s portfolio, Kelly responded that investors should treat this as one of their more speculative investments and suggested an allocation of 5% or less of a diversified portfolio, with above average risk, but potentially huge return potential. He also sees this fund as a long-term investment- rather than a trading vehicle - as success is expected to be achieved over years or even decades as Blockchain gets adopted in a wide range of industries and sectors.
For investors who are intrigued by the concepts of crypto currency and Blockchain technology, but who aren’t interested in holding actual Bitcoin or other currencies, the Blockchain ETF is a way to gain exposure in the space with more typical equity investments.
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