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Want to Tap China's Blockchain Usage Spree? Play BCNA

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The blockchain ETF space is fast teeming up, reinforcing the importance of the technology in reshaping the world ahead. Its market size is expected to grow from $241.9 million in 2016 to $7,683.7 million by 2022, at a CAGR of 79.6% per marketsandmarkets.com.

The newly launched funds look to track a portfolio of stocks from companies that are deemed to have strong exposure to blockchain technology development. But the issuers are not allowed to use the word “blockchain” in the name, per the SEC ruling.

Most recently, Reality Shares launched a new fund comprising China’s blockchain-related companies. We delve a little deeper into it.

Reality Shares Nasdaq NexGen Economy China ETF BCNA

The fund tracks the Reality Shares Nasdaq Blockchain China Index, which consists of blockchain-related companies located in Hong Kong and mainland China. In total, the fund holds about 31 stocks.

Alibaba Group Holding Ltd (4.43%), Baidu (4.18%) and Ping An Insurance Group Co (3.62%) are the top three holdings of the fund. Information Technology (65.5%), Financials (25.8%) and Consumer Discretionary (8.7%) are the top three sectors of the fund. It charges 78 bps in fees.

How Does It Fit in a Portfolio?

Blockchain technology is presently seeing a meteoric rise. Blockchains allow information to be shared in peer-to-peer networks, but data in any given block cannot be changed or copied without changing all subsequent blocks. This makes the technology fraud-proof. Needless to say, investors would be interested in this technology.

In the rise of this technology globally, China’s contribution is noteworthy. China filed more blockchain-related patents in 2017 than any other country in the world, per the issuer. Blockchain-related investments in China can have a wide coverage including the infrastructure, financial services, manufacturing, and technology industries.

So, investors intending to tap China’s blockchain deployment spree may find this fund an intriguing option. Investors should also note that blockchain-based ETFs could be good choices for investors seeking to bet on the technology that takes them to bitcoin and other cryptocurrencies. The digital currency was the hottest trade of 2017 but is currently going through a rough patch (read: Forget Bitcoin, Bet on Blockchain With These New ETFs).  

Several attempts for ETF issuances on bitcoin have not seen success as yet due to regulatory hurdles. So, investors wanting to get an exposure to bitcoin via the ETF route may find blockchain ETFs useful (read: Will VanEck's Renewed Attempt to Launch Bitcoin ETF Work?)

In this regard, we would like to highlight that the Peoples Bank of China (PBoC) is planning a launch of its own national cryptocurrency called DCEP (Digital Currency for Electronic Payment).

What About Competition?

There are blockchain ETFs available in the market, namely Reality Shares Nasdaq NexGen Economy ETF (BLCN - Free Report) , Amplify Transformational Data Sharing ETF (BLOK - Free Report) , First Trust Indxx Innovative Transaction & Process ETF (LEGR - Free Report) , Innovation Shares NextGen Protocol ETF (KOIN - Free Report) and REX BKCM ETF (BKC - Free Report) .

However, none of the funds are fully focused on China. Funds like BLCN, BLOK and LEGR have exposure to China in the range of 6% to 12%. From this perspective, the newbie is unique and may see uninterrupted success.

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