The blockchain fever is high thanks to an astronomical surge in bitcoin price. The digital currency skyrocketed to a fresh high of above $5,000 in late August from around $997 at the start of the year (read: Bitcoin Skyrockets, Race to First Cryptocurrency ETF Heats Up).
Inside The Surge
The excitement surrounding the cryptocurrency is due to the blockchain technology that backs bitcoin. The blockchain is a decentralized public ledger, which offers a secure, fast and cheaper medium of carrying out online transaction and online transfer of information without the need of third-party verification. Other cryptocurrencies such as Ethereum are also powered by the blockchain technology.
According to the Market and Markets report, business surrounding the blockchain technology is expected to grow from $210.2 million in 2016 from $2.32 billion by 2021 at a CAGR of 61.2%. The global Blockchain Technology Market’s research report projects a CAGR of 55.6% from 2017 to 2021.
Additionally, the split of the digital currency into bitcoin and bitcoin cash added to the strength last month. The action will expedite transaction time, leading to a speedy growth of the cryptocurrency (read: Bitcoin Soars to Record High: Fork, Futures and ETFs Explained).
Further, bitcoin is gradually becoming a safe-haven currency as tensions between North Korea and the United Stated as well as the Washington turmoil have spurred a rally in the digital currency. Moreover, strong demand from Japan and rising institutional investor interest are pushing up the price of bitcoin.
Dip: A Buying Opportunity
The cryptocurrency is currently trading below $4,000, down 20% since the start of this month following talks of China's central bank restricting the trade of bitcoin and other cryptocurrencies on domestic exchanges. The current dip could be a buying opportunity for investors to capitalize on the strong optimism surrounding this innovative technology (see: all the Technology ETFs here).
How to Play?
Given this, we have highlighted three ETFs & stocks that are benefiting most from the bitcoin surge and the blockchain technology boom. The trend is likely to continue in the months ahead.
While several issuers have filed for bitcoin ETFs in recent months, none of these have received approval until now. However, the popularity and success of bitcoin is driving up these ETFs (read: Bitcoin ETFs: More Issuers Join the Race):
ARK Web x.0 ETF (ARKW - Free Report)
The surge in bitcoin prices is a big boon for this disruptive-companies focused ETF as ARKW is the first ETF to add bitcoin to its roster. This is an actively managed fund focusing on companies that are expected to benefit from the shift in technology infrastructure to the cloud, enabling mobile, new and local services. The fund holds 43 stocks in its basket with none holding more than 6.9% share. The ETF has amassed $90.9 million in its asset base and trades in a lower average daily volume of around 44,000 shares. The expense ratio comes in at 0.75%. The ETF is up 61.5% in the year-to-date time frame.
ARK Innovation ETF (ARKK - Free Report)
This is also an actively managed fund focusing on companies that are expected to benefit from the development of new products or services, technological improvement and advancements in genomic revolution, Web x.0 and industrial innovation. The fund holds 52 stocks in its basket, with each holding less than 6.2% share. It has AUM of $131.2 million in its asset base and trades in a light average daily volume of around 56,000 shares. The product charges 75 bps in annual fees and has gained 68.9% so far this year (read: 5 Top Performing Stocks of the Top ETF of August).
iShares PHLX Semiconductor ETF (SOXX - Free Report)
Semiconductor ETFs like SOXX are gaining from rising demand of cryptocurrency mining, which needs the usage of semiconductors. This ETF follows the PHLX SOX Semiconductor Sector Index and offers exposure to 30 firms with none holding more than 9.15% of assets. The fund has amassed $1.2 billion in its asset base and trades in a solid average volume of around 513,000 shares a day. It charges 48 bps in fees a year from investors and has surged 24.5% so far this year. It has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook.
NVIDIA Corporation (NVDA - Free Report)
This is a Zacks Rank #1 visual computing company with worldwide operations. This graphics chipmaker is the biggest beneficiary of the cryptocurrency mining boom that will boost demand for chips. Notably, NVDA graphics cards, or GPUs, are incredibly popular with cryptocurrency miners. The stock has seen solid earnings estimate revision of 55 cents for the current fiscal year over the past 90 days with an expected earnings growth of 40.13%. It belongs to the best Zacks Industry Rank in the top 1% and has surged 58.9% so far this year (read: Here's Why Semiconductor ETFs Could Continue Their Rally).
This is the world's largest social game developer with users playing their games like CityVille, FarmVille, FrontierVille, Words With Friends, Mafia Wars, Zynga Poker, Cafe World, and Treasure Isle. The Zacks Rank #2 (Buy) online video game giant is promoting blockchain transactions. In fact, it is the first major company to adopt bitcoin transactions for in-game purchases. The company is expected to see whopping earnings growth of 568.75% this year while the earnings estimate was revised up just by a penny over the past 90 days. Zynga has a solid Zacks Industry Rank in the top 27%. Its shares are up 47.5% since the start of the year.
Advanced Micro Devices Inc. (AMD - Free Report)
The Zacks Rank #3 (Hold) world-class semiconductor company offers x86 microprocessors as an accelerated processing unit (APU), chipsets, discrete graphics processing units (GPUs), and professional graphics. The bitcoin mining craze has also resulted in higher demand for AMD’s graphics cards. The stock saw positive earnings estimate revision of four cents for this year over the past 90 days and has an expected earnings growth rate of 170.78%. It belongs to a solid Zacks Industry Rank in the top 40% and has gained 8.5% so far this year.
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