Mitigating Risk In An Evolving Blockchain-driven World using ETFs


Blockchain and data technologies have been on the cusp of revolutionizing the pre-existing data world with the primary use currently being the back-end system to many cryptocurrency projects.

Some investors want to gain exposure to cryptocurrency and blockchain technology, but it’s just too volatile in its early stages if you were to solely invest in them. However, diversification through an ETF might be the financial tool to best suit investors over the long term.

The ETF BLOK is an actively managed blockchain and data fund that invests a minimum of 80% of its assets in publicly traded companies that are involved in or utilizing blockchain technology.

The Fundamentals

The fundamentals of the BLOK ETF are centered around companies that utilize various types of financial data, such as cryptocurrency. Bitcoin is the most prominent digital asset on the balance sheets of some of the stocks in the ETF.

MicroStrategy is the top holding as the company holds approximately 105,085 bitcoins on its balance sheet making it one of the largest holdings out of any institution in the world.

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Another high-ranked holding in the ETF is Square. This is primarily because of the exposure to Bitcoin through the Square-owned Cash App platform which gives users the ability to buy, sell, send, receive, and withdraw Bitcoin.

There are also a few Bitcoin mining stocks that diversify the entire ETF into different sub-industries which is also compelling to see.

Mitigating Volatility

It’s become common knowledge that diversification mitigates risk, what about volatility?

Volatility is typically seen as massive fluctuations in the price of an asset, in this case, we can compare it to Bitcoin. Swings of over 40% in either direction are normal for Bitcoin, in fact, it just recently happened in May of this year.

The BLOK ETF however only dropped close to 20%, only half of what Bitcoin did. This illustrates how volatility is mitigated dramatically across all of the holdings.

Investment Opportunities

The BLOK ETF can provide a very diversified approach to the traditional way of investing in data and blockchain technology. However, it has underperformed the digital asset Bitcoin during the same period. This is a given though as diversification not only protects against risk but also evens out volatility as stated in the section previously.

So, what can we realistically expect?

This blockchain and data-driven ETF will likely follow a similar trajectory as the broad crypto market as the holding within the fund is tied to some form of cryptocurrency exposure either through holding, mining, or integration into a user ecosystem.

This ETF also saves you the hassle of having to form your allocation in your portfolio with various stocks, managing the portfolio, and removing or adding stocks based on recent developments. It can save investors a lot of time if they are looking for an easy way to gain exposure to the fast-moving cryptocurrency industry.

Closing Thoughts

The cryptocurrency and blockchain industry is just getting started, so investors are looking for ways to be a part of it. Many investors recognize that this is no longer just a fad, but a huge industry in the making. This is what has pushed so many institutions and corporations to adopt the new data-driven blockchain technologies.

Overall, it’s clear that the BLOK blockchain and data ETF is a compelling candidate for investors looking to gain exposure to the cryptocurrency and blockchain world. Not only that but the risk is mitigated as volatility is quickly halved as seen from historical performances.

There’s a lot to be excited about when watching the developments unfold of the latest digital technologies that look to become the favored currencies of the world. Investors are witnessing the equivalent to the first stages of the internet.

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Author’s Strategy Insights

This is not intended to be investment advice. As always do your own due diligence and invest based upon your own risk appetite and consult your own financial advisor for the right investment strategy for your specific needs.

Blok is a good alternative to direct Blockchain and cryptocurrency investing. I always write about speculative investment opportunities and how to budget your portfolio so that you can participate in some investment opportunities that can pay off and enhance your portfolio returns. On the flip side allocating a specific amount for speculative investments limits the risk to your portfolio in the event it doesn’t work out.  We want to open the door to a potential windfall not bet the house we live in that its gonna actually happen.

If you wanted to take advantage of some opportunities to invest in crypto or data and you want a more passive investment approach, an ETF such as BLOK would allow you to gain exposure to this industry since the risk will be spread among multiple holdings inside the fund. A Buy and hold approach will give u access to upside gains as the industry matures and new technologies and crypto are adopted in our everyday lives.

Unfortunately this fund does not pay a dividend…so if you wanted to derive some income from this fund you can look at its option chain and generate some extra income. For me the best approach would be to sell a cash secured put on the fund. Since I would want to own it this will allow me to collect some cash upfront by selling my obligation to purchase 100 shares at a strike price of my choosing IF the price of the fund is below the strike at the expiration of the contract.

Looking at the option chain, the September 17th Put expiration cycle with a strike price of $49 will allow me to collect about $263 of premium as of this writing. If price never goes below my strike price by the expiration date the premium I received is my max profit on the trade. So lets do some math To sell this option I would need to have $4900 in collateral, if the contract expired worthless meaning it has no value above the strike price, then my return on cash would be about 9.4% for about a 25 day holding period as of this writing.

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Andre Mitchell
Andre Mitchell

Andre Has been trading financial markets for 5+ years. Has consistently grown small account sizes to medium sizes. Andre is a long term income investor that primarily operates in the stock options market and loves sharing his insight and experience with people who love investing and growing their financial wealth.

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