April 14, 2024


Technology and Age

A Blockchain ETF to Capture Growth Beyond Crypto

This article was originally published on ETFTrends.com.

Blockchain technology can add value to your exchange traded fund portfolio and do more than just track cryptocurrencies.

In the recent webcast, Beyond Bitcoin: How Blockchain is Transforming the Investment Industry, Bill Belden, President, Amplify ETFs, highlighted the growth potential of blockchain technology. For instance, worldwide spending on blockchain solutions in 2019 was $2.9 billion with only 29% of companies in the consumer products & manufacturing industry currently using the technology. Looking ahead, Belden projected that the size of the global blockchain market could grow from $3 billion in 2020 to $39.7 billion by 2025, a compound annual growth rate of 67.3%. This growth will be driven by three main sources, including venture funding, enterprise investment in blockchain technology, and the rise of blockchain solutions for supply chain management. Additionally, we will see greater geographic expansion into emerging markets and the potential growth of private blockchains.

Bitcoin has been a major point of interest as more look to beneficial uses of cryptocurrency in the global economy. Belden pointed out that crypto is not blockchain, it is instead an application running on the blockchain technology.

Belden argued that blockchain technology has a wide range of applications and growth opportunities. For example, applications that could benefit from the transparent distribution ledge include things like central bank digital currencies, digital identity, supply chain management, health care, life sciences, food safety, voting, charitable donations, and real estate, among others.

Michael Venuto, Portfolio Manager, BLOK ETF, Toroso Investments, argued that the blockchain technology could play a pivotal part in the shift toward a cashless society. Early in March, the World Health Organization warned that banknotes may spread the virus and recommended ‘contactless’ forms of payment. The United States is woefully behind in contactless payments, with less than 0.25% of U.S. point-of-sale transactions conducted through a contactless payment method. In comparison, Visa calculated that 48% of its in-person transactions, excluding the U.S., are contactless, including more than 90% of transactions in Australia and more than 50% in the U.K. and Canada.

The blockchain distributed ledger technology can track assets and payments securely. This new need for fraud protection could accelerate as we witness the growth of more secure, peer-to-peer, contactless payment solutions that use authentication, monitoring, and data encryption.

Venuto also believes that blockchain can be used in supply chain management. The Covid-19 global pandemic has revealed the weaknesses in the global supply chain, with a general lack of connectivity and data exchange built into our global supply chains. The World Economic Forum warned that the future resiliency will depend on building transparent, interoperable, and connective networks. In response to these challenges, the World Economic Forum co-developed the Redesigning Trust: Blockchain Deployment Toolkit with a supply chain focus.

Additionally, Venuto pointed to potential blockchain applications in the healthcare industry, including medical supply chains, testing, contact tracing, and medical research. Blockchain is being leveraged to connect buyers with non-traditional suppliers producing masks and other PPE needed to combat COVID-19. Due to the inherent transparency of the technology, hospitals could guarantee that all patients’ health records were ‘tamper-proof’, while still ensuring the data’s privacy. A series of ongoing efforts across universities, medical academia, the private sector, and even private citizens are harnessing distributed systems in the fight against COVID-19.

“We believe Covid-19 will expand and accelerate the trend toward a cashless society with digital currency solutions. Worldwide spending on blockchain solutions will increase post the Covid-19 crisis. Blockchain will become an important tool in fighting the Covid-19 virus,” Venuto said.

As a way to tap into this growth opportunity, investors can look to the Amplify Transformational Data Sharing ETF (NYSEARCA: BLOK), which utilizes an actively managed approach to investing in the fast developing world of blockchain-based technology, allowing the fund’s portfolio managers to respond in real-time to valuations, company fundamentals, and announcements that may impact the blockchain marketplace. Toroso Investments acts as the active sub-advisor and ETF sponsor to the ETF offered by Amplify ETFs. Toroso strives to outperform the EQM-Emerita Blockchain BLOK 50 Global Index with this strategy.

Financial advisors who are interested in learning more about the blockchain technology can watch the webcast here on demand.