Blockchain is the hottest trend in technology. It’s credited as the building blocks that made Bitcoin, a popular and lucrative cryptocurrency, possible. And it is paving the way for reimagining the internet of the future.
It could be the next big thing. Imagine if you could invent a time machine and invest in Alphabet, Inc. before anyone had heard of Google, where would you be today? Putting your money in Blockchain today could be the next version of that analogy.
Cryptocurrencies like Bitcoin have made big headlines in financial news in recent months. There has been a lot of volatility in the value of Bitcoin with prices surging as high as $64K and then falling to $30K. Blockchain technology as part of the bigger picture represents a little more stability as it will shape the future of data for healthcare, banking, supply chain 4.0, and much more.
What to Know About Blockchain Stocks and ETF Investments in 2022
A blockchain ETF is similar to any other theme-based investment. Each investment is made up of a collection of companies that share a common interest in blockchain technology. Blockchain ETFs capitalize on the benefit that blockchain technology provides to companies, allowing them to streamline operations and save money using decentralized data.
While the future of blockchain is promising, these investments are susceptible to the same risks as any technology-based startup with higher rates of failure than other business models and a propensity to get stalled with regulatory roadblocks.
10 Best Blockchain Stocks and ETFs This Year
Investing in the future of the internet, ranging from content delivery to cryptocurrencies and digital payments starts with finding the right blockchain ETF. While there is risk in every investment and tech investments still have more risk than other business sectors, we’re willing to hedge a bet that blockchain has a strong future.
You’re likely to recognize some big names on this list because there are many companies already established in the financial world and in technology that recognize the power of blockchain technology to transform our digital futures.
Visa Inc. (Ticker: V)
That’s right, Visa as a long-standing credit card company is making big moves towards blockchain technology. Visa has taken a proactive approach by creating a venture capital firm that invests directly n the development of blockchain technology. Visa’s involvement is largely as a collaborator, helping shape the future of finance with an eye on blockchain technology.
Visa’s FinTech Fast Track program is a fast and convenient way to connect the vast resources of Visa as a payment processor with crypto wallets, reaching more than 70 million merchants. Visa Crypto APIs help users buy and sell bitcoin. And the Visa Digital Currency Innovation Hub helps users learn the ins and outs of a complex new digital currency.
Square Inc. (Ticker: SQ)
Square is a subsidiary of Twitter and an early adopter of blockchain technology. Square is a payment processing company built for mobile payments. Their services include merchant services through the Square platform and peer payments through CashApp. The company has had a strong 2021 as the world is moving steadily towards digital money. The company’s profits are up an impressive 91% over their 2020 numbers.
Under the leadership of Twitter CEO Jack Dorsey, Square is embracing the world of decentralized finance (DeFi). DeFi applications facilitate the flow of money using accessible, efficient, and low-cost alternatives to traditional banks.
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International Business Machines Corp. (Ticker: IMB)
Another familiar face in the blockchain basket is International Business Machines (IBM). While the company was originally known as an early computer manufacturer, its eye is on blockchain technology now. In 2017 they began aggressively building out their blockchain projects, now spanning at least 500 individual projects.
One of the most notable investments by IBM is its hyperlogic fabric. It’s a platform designed to build, grow, and govern blockchain solutions in any environment. In short, it helps businesses keep open-source code in check for agile programming that is adaptable to ever-changing business needs.
Advanced Micro Devices (AMD) is a leading chip manufacturer. They have built a well-established name for themselves in the technology space and jumping feet first into blockchain technology just makes sense. AMD has formed an alliance with Blockchain Gaming Alliance to develop blockchain-powered gaming platforms.
Although the gaming alliance is their primary involvement in blockchain, it’s not their only one. AMD routinely finds itself on the leading edge of blockchain technologies as new niches in entertainment and cloud computing find their way to the technology.
Amplify Transformation Data Sharing ETF (Ticker: BLOK)
Amplify allows investors to put their money in a broad slice of companies across different industries with their hands in the blockchain honey pot. Some of the top holdings in this fund include the likes of Paypal and Square, both established online payment processing companies. If you feel like blockchain technology is still a risky investment, this type of ETF can help mitigate your risk by spreading it out to over 45 different companies in different industries doing different things.
BLOK is the only blockchain ETF that is actively managed, making it a clear and obvious top choice for many investors dipping their toes into blockchain investments. While an actively managed ETF is often more expensive, we argue that BLOK is nearly identical in costs to similar ETFs like Siren. We think that’s a big win!
DocuSign Inc. (Ticker: DOCU)
This company is a market leader in the latest electronic signature technology. DocuSign uses the Ethereum blockchain—primarily to record customer agreements—and helped create one of the first prototypes of blockchain-based smart contracts back in 2015.
Brad Sills, a Bank of America analyst, believes that DocuSign has tremendous potential to continue gaining momentum, and the company’s blockchain ventures are gaining traction. In addition, its margins have continuously expanded over recent quarters. He believes that DocuSign is in an excellent position to continue increasing its significant share of a 24$ billion addressable market.
While DOCU stock plunged in December 2021, you’ll likely still want to keep an eye on the company, as we don’t think that their downward trend will last too long into 2022.
Coinbase Global Inc. (Ticker: COIN)
You’re unlikely to find investors and analysts that agree on which cryptocurrencies will take over the finance sector as the world’s preferred digital currency or which company will build the metaverse. However, investors and analysts typically see blockchain, cryptocurrency, and the metaverse as the largest growth themes in technology.
Coinbase, the leading crypto exchange, can benefit from all three factors. David Holt, a CFRA analyst, believes that Coinbase has a high potential to exceed its already high expectations due to the long-term potential of growth in the crypto economy. This economy is currently being built using blockchain technology. As a result, COIN stock took a hit in late 2021 but is already rising again in early January 2022.
VMware Inc. (Ticker: VMW)
This company provides various solutions and services—most notably, enterprise virtualization software. In addition, VMware launched the VMWare Blockchain back in 2020, with the intentions of helping manage complex workflows and meeting the needs of multiparty, business-critical applications.
Mark Cash, a morningstar analyst, notes that the company’s recent spin-off by Dell of its 81% stake in VMware is a bullish opportunity for investors. That spin-off allows VMware to generate growth catalysts without worrying about the tech giant Dell weighing it down.
In the long term, Cash believes that VMware will expand its margins and accelerate its growth. So far, in 2022, VMW stock has been steadily increasing, showing promise for what’s to come later in the year.
Nvidia Corp. (Ticker: NVDA)
Most investors know about Nvidia—it’s a top company that designs and produces processing chips and high-end graphics cards for servers, supercomputers, and personal computers. Vivek Arya, a Bank of America analyst, believes that Nvidia is one of the only companies with the hardware, software, ecosystem, developers, and scale to meaningfully participate in powering the metaverse, which will have significant components for blockchain technology.
For years, the company has been prioritizing the metaverse, launching its own Omniverse testing in late 2020. In addition, Nvidia also produces specialized chips designed specifically for mining cryptocurrency, which provides them with even more blockchain exposure.
NVDA sees a slow decline in early 2022; however, it’s unlikely to last, seeing as how the company has so much potential to change how we use the blockchain.
Overstock.com Inc. (Ticker: OSTK)
As a leading online retailer, Overstock.com was one of the first companies to accept Bitcoin as a payment form. In addition, the company spent many years investing in blockchain projects via its subsidiary Medici Ventures. In 2021, the company converted Medici into a fund, which Pelion Venture Partners now manages.
Over the next few years, that fund will develop blockchain startups, sharing the profits with Overstock. Curtis Nagle, another Bank of America analyst, believes that the upcoming presentation by Pelion in early 2022 might be a bullish catalyst for OSTK.
Overstock stock has seen a steady decline since early December 2021, but hopefully, with Pelion’s upcoming announcements, it will begin gaining traction in the coming months.
An Extra ETF to Keep an Eye On: Siren Nasdaq NexGen Economy ETF (Ticker: BLCN)
Siren is another aggregator that helps spread your risk around to different companies in different industries. This ETF currently has 69 holdings, including big names like Paypal and smaller companies like Galaxy Digital Holdings. The fund is growing and up at least 30% from last year as confidence continues to grow in blockchain technologies.
Understanding & Investing in Blockchain Technology
Understanding how blockchain works starts with reviewing the purpose of this technology. Blockchain, at its core, reduces risks of corruption, fraud, and the tarnishing of data by central authorities. By democratizing access to information, blockchain makes it nearly impossible for any single party to manipulate the facts.
By linking and making verified data accessible to everyone, this technology simplifies and automates the previously inefficient processes, like manually recording information.
For example, Walmart uses blockchain technology to trace products back to farms, ensuring food safety. So in cases of salmonella or E. coli outbreaks, the retail giant can quickly find the source and prevent the contamination from spreading further.
And large corporations like PayPal, Microsoft, Salesforce, IBM, and even Starbucks use blockchain technology for infrastructure, automation, digital security, and more.
Outside of trading cryptocurrencies, the two primary ways to gain exposure to blockchain are through individual stocks and ETFs.
The Risks Associated With Blockchain & Emerging Technologies
Like other thematic investments (artificial intelligence, electric vehicles, etc.), investing in blockchain technology comes with additional sources of volatility. Market-related risks, like pricing valuations and sudden changes in sentiment, and macro risks, like new government regulations, can affect these investments out of the blue.
Take Bitcoin, for example; it uses blockchain tech to store every transaction that was ever made. It’s been in existence since 2009 and still sees skepticism from investors and authorities alike. That uncertainty is what translates to greater volatility.
Even for sophisticated investors, assessing the value of cryptocurrencies like ETH, BTC, XRP, etc., remains challenging. Many traders are unsure about what value they will hold in the future.
Nevertheless, the trend in cryptocurrency and blockchain technology doesn’t seem to be going away anytime soon. In fact, that trend is gaining steam—along with the adoption of blockchain.
Considerations to Keep in Mind
Investing in technology can be a gamble. There are many great ideas that fizzle and drown for a variety of reasons, making investing in technology a little volatile at times. But when they manage to stay afloat, they surge to the top. If you recognize strong names like Paypal, Twitter, AMD, and Visa then you already know where to put your money.
The benefit of investing in blockchain ETFs is the built-in safety in diversifying your investments across multiple companies in different industries with varying amounts of risk. ETFs are the safest way to get your money into blockchain without the nerve-wracking risk of putting all of your eggs into one basket.
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