The blockchain mutual funds are coming.
One of these is Bitcoin Strategy ProFund, which launched in the summer of 2021 and made history as the first-ever Bitcoin strategy mutual fund. The other, Invesco CoinShares Global Blockchain ETF, is India’s first mutual fund to offer investment in the blockchain ecosystem.
Why are there so few blockchain mutual funds? These funds have investment constraints that allow them to only invest in specific assets for their portfolio. As a result, high-risk investments such as shares in blockchain startups or digital assets are generally not permissible for traditional mutual funds.
To provide you with other options, we have composed a list of the top five best blockchain mutual fund alternatives you could invest in today.
Arguably the easiest way to add blockchain exposure to your portfolio is to purchase blockchain ETFs. Currently, there are over a dozen blockchain exchange-traded funds (ETFs) that invest in shares of publicly-traded companies that are involved in the development or the deployment of blockchain technologies.
The largest blockchain ETFs (by assets under management) include the Amplify Transformational Data Sharing ETF (BLOK), which invests in “transformational data sharing technologies” with a focus on blockchain technology. Launching in 2018, this was also the first blockchain ETF approved by the SEC. Rather than investing directly in blockchain technology or cryptocurrency, the mutual fund invests in companies that partner with or directly invest in companies developing and utilizing blockchain technologies.
Siren Nasdaq NexGen Economy ETF (BLCN) is another large blockchain ETF that invests in companies researching, developing, or deploying blockchain technology. Two other fast-growing blockchain ETFs include the First Trust Indxx Innovative Transaction & Process ETF (LEGR) and ProShares Bitcoin Strategy ET (BITO).
Half of LEGR’s funds are devoted to companies actively developing blockchain technology. The other half are dedicated to companies that use blockchain technology. BITO made history in October 2021 when it became the first cryptocurrency ETF that the SEC allowed to trade on a major U.S. exchange.
Blockchain ETFs are the closest alternative to blockchain mutual funds as they can easily be bought and sold on regulated stock exchanges, can provide investors with a low-cost blockchain exposure, and can be purchased by any type of investor.
Exchange-Traded Blockchain Investment Products
Alternatively, you could also invest in exchange-traded blockchain investment products such as digital currency ETNs and tracker certificates.
For example, the XBT Bitcoin Tracker One, which has been trading on the Stockholm Stock Exchange since 2015, provides investors with exposure to the price development of bitcoin without having to buy and store the underlying digital currency itself.
Another digital currency ETN to look into is the Vaneck Vectors Ethereum ETN, which is a fully-collateralized exchange-traded note that invests in Ethereum.
Or, you could purchase the Swissquote Multi Crypto Active Index Tracker Certificate, which trades on the Swiss Exchange (SIX) and provides buyers with exposure to a basket of leading digital assets, including bitcoin, Ether, Litecoin, and Bitcoin Cash.
[For more, see our guide to Best Crypto ETFs, ETNS, and ETPS.]
Tokenized Blockchain Funds
Blockchain technology has enabled the emergence of a new type of investment vehicle, called the tokenized investment fund. Tokenized investment funds enable investors to gain exposure to venture capital or digital asset investments through the purchase of a single digital token.
For example, through the purchase of SpiceVC’s SPICE token, investors are able to indirectly hold a stake in promising blockchain ventures such as Bakkt, InvestaCrowd, Lottery.com, and Securitize, simply by holding a digital token.
Alternatively, investors who want broad exposure to the leading digital currencies and tokens could purchase Crypto20’s C20 token, which provides a stake in the Crypto20 tokenized index fund that tracks 20 digital assets.
[For more, see our intro to Investor DAOs.]
Crypto Hedge Funds
There are also many crypto hedge funds and venture capital firms that you can invest in to gain blockchain exposure.
The minimum investment requirement for these types of funds, however, is usually quite high and a large number of funds can be difficult to get into if you are not a high-net-worth individual with connections in the industry. Having said that, there are enough crypto funds out there that will allow you to invest, even with smaller capital contributions.
One of the largest crypto Hedge Funds is PolyChain Capital. Founded in 2016, this hedge fund invests in early-stage start-ups focused on blockchain technology in addition to cryptocurrencies. However, the current minimum investment is $500,000.
A more affordable alternative is Pantera Capital, which requires a minimum investment of $100,000. Founded in 2003, Pantera Capital was initially a traditional hedge fund focused on investing in macro trends. The company took a leap to focus on blockchain and cryptocurrency and now has several high-profile institutional backers. Other crypto hedge funds worth looking into include Digital Currency Group, Blockchain Capital, and Andreessen Horowitz (a16z).
The main benefits of investing in crypto funds are that your money is being managed by professionals and that token storage is being taken care of by the investment firm. For investors who prefer a hands-off approach, crypto funds (similar to blockchain ETFs) provide a good alternative to blockchain mutual funds.
[For more, see our list of bitcoin hedge funds.]
Digital Real Estate Investing
In April of 2021, California billionaire Rick Caruso’s real estate firm began accepting rent payments in bitcoin. Blockchain and digital assets are becoming an integral part of the real estate industry, and investors can now put their money into tokenized real estate platforms.
Lofty.ai allows you to invest in tokenized real estate for as little as $50. The company’s flagship AI and in-house investment team vets each potential investment. RealBlocks is another noteworthy investment opportunity in the real estate space. The company’s platform allows investors to buy fractional interests rather than entire assets or portfolios.
Meridio allows commercial property owners to sell digital shares of their real estate. The platform connects property owners looking to liquidate portions of their ownership with individual and corporate investors.
Blockchain has a lot to offer the real estate industry, as its technology can help increase trust through transparency. Trust is imperative in real estate, as real estate agents, listings, and websites all require a significant amount of trust from buyers and sellers. Additionally, blockchain technology can speed up the contracts process, reduce costs, and save time.
Invest in Digital Assets Directly
Finally, you have the option to build your own digital asset portfolio. By investing in the digital tokens of the most promising blockchain projects in the market, you can gain broad exposure to the growth in the blockchain technology sector.
Constructing your own portfolio will involve researching the digital assets you want to invest in thoroughly to ensure that you are choosing the digital currencies and tokens that suit your risk-return profile.
Most investors begin their journey into digital assets by investing in blue-chip cryptocurrencies, which are highly established, trusted digital assets with large market capitalization. Some of the top blue-chip cryptocurrencies include Bitcoin and Ether, the two oldest and most-established cryptocurrencies on the market today.
Other notable blue-chip cryptocurrencies include Cardano, Binance Coin, Tether, and Uniswap. Of course, top crypto options can change, which is why gaining access to exclusive crypto content, such as the Blockchain Believers Portfolio, can help you decide which ones are worth your investment.
The above-mentioned alternatives should provide you with sufficient blockchain exposure for your investment portfolio should you choose not to invest in blockchain mutual funds.
- Bitcoin ETFs: What They Are and How to Invest (in 2020)
- Bitcoin ETF Approval: Timeline and Estimated Approval Dates
- Security Tokens: What They Are and How to Invest (in 2020)
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