As the traditional finance sector continues to record an influx of interest in exchange-traded funds, blockchain ETFs are also gaining prominence with positive returns.
According to data provided by ETF database ETFdb.com, four selected blockchain exchange-traded funds listed on the U.S. exchanges have recorded an average ROI of 74% over the last year. Amplify Transformational Data Sharing ETF has the highest returns at 136.09%, followed by Siren ETF Trust Siren Nasdaq NexGen Economy ETF at 72.45%.
Additionally, capital Link NextGen Protocol ETF has an ROI of 43.85%, while First Trust Indxx Innovative Transaction & Process ETF has returns of 43.66%.
The covered blockchain ETFs invest in firms that deal in developing businesses through the deployment of blockchain technology. Furthermore, the funds also invest in futures and options pegged to the performance of cryptocurrencies like bitcoin. Finally, they also invest in crypto assets management companies like Grayscale or Bitwise.
The significant returns also correlate with a period the cryptocurrency sector has been on a bull run led by bitcoin. Notably, the crypto rally was mainly inspired by the entry of institutional investors into the industry, with companies like Grayscale taking the lead.
Additionally, the general growth of ETFs stems from their underlying nature of enabling investors to diversify their portfolios without actually owning the assets themselves. Thus, investors buy into the ETF without going through the complicated process of trading itself.
Besides the U.S., crypto ETFs are also gaining prominence in other markets like China. According to the Greater China ETF Investor Survey, investors in the region are allocating more money on fintech and crypto ETFs due to gains in the sector. Following the overall ETF growth, about 92% of investors across the region plan to increase their allocations within the next year.
Our previous research also confirmed the growing interest in ETFs as the value of assets under management (AUM) by the ten largest ETFs had surged 47.56% between March 2020 and April 2021, from $1.14 trillion to $1.69 trillion.
U.S. bitcoin ETF regulatory hurdles
The returns also offer investors a glimpse of what to expect once bitcoin ETFs have been approved in the U.S. Notably, different players have applied for an opportunity to run bitcoin ETFs. However, they are still facing regulatory hurdles from the Securities Exchange Commission.
One SEC argument is that bitcoin trades on largely unregulated exchanges, opening up risks of fraud and price manipulation. Furthermore, the U.S. regulator delayed the ruling on approval of the latest filing by CBOE Global Markets.