With the rise of cryptocurrencies, a slew of related industries has emerged as viable options for investors looking for long-term investments. ETFs (Exchange-Traded Funds) is one of them. Blockchain ETFs are a type of stock exchange-traded fund that invests in companies that use blockchain technology. They're a relatively new concept but are gaining traction. Blockchain-focussed stocks operate or profit from the development and application of blockchain technology. Investing in cryptocurrencies, as opposed to blockchain ETFs, is relatively simple. Investors choose a coin or token, and if they believe it has potential, they invest directly in it and receive a digital asset of equal value in return.
On the other hand, when investors invest in a blockchain ETF, they do not “purchase” anything. The prospect of progress is what they put their money into. Furthermore, blockchain ETFs do not refer to a certain company's or product's money. Rather, it is about all businesses that are connected to the blockchain technology in some way or rely on it for profit.
There are some 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 equity shares of companies just like any sector fund or thematic fund.
– Many blockchain funds do not buy crypto coins. In fact, funds that buy these coins are crypto ETFs.
– Blockchain ETFs are a new phenomenon with only a few dozen such funds operating globally.
– In their current form, blockchain ETFs are relatively less volatile than crypto coins.
The blockchain is the underlying technology on which the coins are traded and their records are maintained in a decentralised way. For instance, Bitcoin is based on the blockchain technology of the same name, and Ether, the coin, is based on the Ethereum blockchain.