*Note: I am not an investment advisor, and these are just thoughts for consideration for those who like to invest, like myself, as a hobby. Please consult with your financial advisor as appropriate before purchasing any stocks.
Many people confuse bitcoin with blockchain – and that’s a big mistake. Blockchain is a type of technology and architecture for data storage while Bitcoin is a cryptocurrency that uses blockchain technology. For a more detailed analysis of the differences between bitcoin and blockchain, check out this article.
While many people I know were able to cash in on the bitcoin phase, there were even more people who got burned when the market crashed. At the moment, I still consider bitcoin to be more like buying collectible coins, antiques, art or baseball cards. You buy something at a certain price, and you hope there will be someone else who will value your purchase more than what you paid for it. To me that’s not really an investment, that’s gambling.
Blockchain, on the other hand, is something completely different, and in better suited to be a long-term investment opportunity. PWC released this helpful infographic to further explain what blockchain is and how it is used.
Every investor should read PWC’s latest white paper/survey: PwC Global Blockchain Survey 2018. One thing you will notice is that it has the potential to disrupt every industry. Many people refer to it as the next “internet” in the impact it will make on how it will transform the industry.
Consider the benefits and barriers noted in the report. Any tool with the potential to increase transparency while increasing the data security of the transaction will be vital in today’s market. Throw in increasing efficiency while reducing costs and you can understand why this is not an idea that is going to go away. It is still in development, but much like the internet, once it’s settled and companies understand and trust the process, there will be no turning back.
- Increased transparency and traceability
- Faster transactions
- Elimination of intermediaries
- Lower costs
- Regulatory uncertainty
- Collaboration challenges
- Complex technology
- Trust issues
Forbes recently posted an article about the top ten companies to watch, which can be found here. But if you are a conservative investor like me, and you want to consider the best way to invest in the broader technology, but not get burned by guessing on the wrong company, you may want to consider a blockchain ETF. In an article on Investopedia, Timothy Smith notes the top 3 ETFs to consider if you want to invest in blockchain industry.
Personally, I invested in “Reality Shares Nasdaq NexGen Economy ETF (NASDAQ: BLCN)” which is described below in more detail. It’s trading at about $25.00 a share. While I don’t see this ETF making rising quickly, I think over the next three years I will see a return in the 40-50% range.
The Reality Shares Nasdaq NexGen Economy ETF, formed in January 2018, seeks to replicate the returns of the Reality Shares NASDAQ Blockchain Economy Index. The fund does this by investing the majority of its $115.03 million asset pool in securities that make up the benchmarked index. These are companies that develop, research and use blockchain technology. The ETF’s portfolio holds 64 stocks, with allocations spread relatively evenly. The fund’s top 10 holdings carry a combined weighting of 21.34%. Key holdings include Advanced Micro Devices, Inc. (NASDAQ: AMD), Intel Corporation (NASDAQ: INTC) and Microsoft Corporation (NASDAQ: MSFT).