Blockchain ETFs vs. Bitcoin ETFs: What’s The Difference?

The terms “Blockchain ETFs and Bitcoin ETFs” have been used a lot in the crypto industry interchangeably but do not mean the same thing in any sense. This has led to a lot of confusion which this article aims to make clear.  

 Blockchain ETFs and Bitcoin ETFs are independent financial vehicles. To understand this distinction, we must first understand the differences between the technologies they monitor and what ETFs are. 

blockchain-etfs-vs-bitcoin-etfs-whats-the-difference

What is ETFs?

ETF means Exchange Traded Funds. These funds can be bought and sold like stock via a traditional brokerage account. ETFs or Exchange-Traded Funds own stocks in companies operating in the blockchain industry. ETFs are considered to be low risk with low cost to entry 

They make it easier for investors to diversify their portfolio by tracking the price of an asset like Gold for example, by gaining access to an entire asset class. 

When people buy into an ETF, they buy into the assets. This means that they will get some right to profit from the growth of the underlying assets to match the value of their investment in the fund. They do not own the underlying assets, as would have happened if they bought and owned stocks. 

Blockchain ETFs 

Although Blockchain is a relatively recent technology, the companies investing in them have strong footing and are well established. E.G Amazon & IBM. 

While Blockchain is the underlying technology of cryptocurrencies, Bitcoin is a cryptocurrency on its own.  

Blockchain ETFs invest in a specific bundle of specific stocks and invest exclusively in a basket of blockchain-based companies. The companies owned in a blockchain ETF have business operations in blockchain technology or are those that invest or profit from the blockchain. 

Blockchain ETFs offer dual benefits—pooled investments in baskets of stocks like that of a mutual fund and real-time trading with tick-by-tick price changes like that of a stock. 

The core purpose of a blockchain ETF is to examine the market valuation of firms whose equity has been listed. it monitors the market valuation of companies investing in blockchain-based start-ups. 

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Blockchain ETFs cannot be altered or influenced by the government 

Some Examples Include:

  • BLOK (Amplify Transformational Data Sharing ETF) 
  • BLCN (Siren ETF Trust Siren Nasdaq NexGen Economy ETF) 
  • LEGR (First Trust Induxx Innovative Transaction & Process ETF) 
  • BITQ (Bitwise Crypto Industry Innovators ETF) 

Bitcoin ETFs 

Bitcoin ETFs which mean Bitcoin Exchange-traded Fund is a way for traders and investors to own and gain exposure to bitcoin without having to own Bitcoin as an asset although it cannot be exchanged for other cryptocurrencies as holders do not own the asset but merely gain price exposure.  

The selected exchange-traded fund monitors the price of Bitcoin via futures contracts on the stock exchange during trading hours, which enables the option to either Buy, Sell or do both on their positions. 

A bitcoin exchange-traded fund (ETF) tracks the value of bitcoin. ETFs can be bought, sold and traded on traditional stock market exchanges instead of cryptocurrency trading platforms. It is a solid way to give both the investors and the speculators bitcoin price disclosure through a reliable source with which they are already familiar. 

They are still relatively new as their first ETF came online in October 2021. A significant advantage to owning Bitcoin ETFs is that even though the average person is not crypto savvy, Bitcoin ETFs provide an opportunity for investors who may not be so crypto savvy to take part in the cryptocurrency market. 

The downside to trading with Bitcoin ETFs however Is that they can only be bought or sold during market trading hours. 

Some Examples Include: 

  • ARKW (ARK Next Generation Internet ETF) 
  • SPBC (Simplify US Equity PLUS GBTC ETF) 
  • BITQ (Bitwise Crypto Industry Innovators ETF) 
  • RIGZ (Viridi Cleaner Energy Crypto-Mining & Semiconductor ETF) 

Advantages

Owning either ETF does not require previous or in-depth knowledge of crypto wallets or exchanges. 

An EFT can hold more than one asset. A bitcoin ETF could hold actual BTC, bitcoin-related stocks and other assets as part of the fund. Even if it only holds BTC, investors gain an option to diversify their portfolios held in traditional markets. 

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An ETF doesn’t require learning how to use a crypto wallet or opening accounts at crypto exchanges. 

Disadvantages

A Bitcoin ETF cannot be exchanged for other cryptocurrencies as holders do not own the asset but merely gain price exposure. 

A Bitcoin price increase/decrease may not be reflected in the ETF value in real-time, especially if the ETF has multiple holdings. 

Crypto can be bought or sold 24/7, but financial exchanges like the New York Stock Exchange (NYSE) are open only Monday to Friday from 9:30 a.m. ET to 4 p.m. ET, so if there is significant movement in BTC’s price overnight you can’t do anything about it until the market re-opens. 

Differences

Blockchain ETFs have a much broader ordinance than Bitcoin or other cryptocurrencies ETFs. Most of these ordinances have yet to be approved by the securities and exchange commission (SEC). This is due to the fact that blockchain technology can be used in multiple industries besides finance. For example, it is being used in the supply chain industry to track the origin of a product and its movement across complicated supply chains encompassing multiple geographies and regulatory regimes. 

Blockchain ETFs are based on the underlying value of blockchain technology while cryptocurrency ETFs are based on the value of underlying cryptocurrencies like Bitcoin and ETH. 

Furthermore, while blockchain is a wide area, cryptocurrency is a single application of blockchain. 

Blockchain ETFs are relatively more stable than bitcoin Efts. 

Bitcoin ETFs are available on every known exchange of repute although regulations guiding cryptocurrencies in most countries still remain unclear while Blockchain ETFs have never been prohibited by any government. 

While Bitcoin ETFs are under investigation by several regulatory bodies in many countries, Blockchain ETFs are neither investigated nor prohibited by regulatory bodies. 

Frequently Asked Questions About Blockchain ETFs vs. Bitcoin ETFs

Which is better: Blockchain ETFs or Bitcoin ETFs?

Which are the best Bitcoin ETFs?

ProShares Bitcoin Strategy ETF (BITO) 

Valkyrie Bitcoin Strategy ETF (BTF) 

VanEck Bitcoin Strategy ETF (XBTF) 

AdvisorShares Managed Bitcoin Strategy ETF (CRYP) 

ProShares Short Bitcoin ETF (BITI) 

What are the best Blockchain ETFs?

Bitwise Crypto Industry Innovators ETF (BITQ) 

Siren Nasdaq NexGen Economy ETF (BLCN) 

Global X Blockchain ETF (BKCH) 

Amplify Transformational Data Sharing ETF (BLOK) 

Why don’t Bitcoin ETFs own Bitcoin?

Bitcoin ETFs don’t own Bitcoin because the SEC is concerned that BTC is traded on non-regulated cryptocurrency exchanges. SEC Chair Gary Gensler is on the record stating that given the novel character of cryptocurrency, relying on the proven and highly regulated futures market is a much safer approach for Bitcoin exchange-traded funds. 

Conclusion 

Both Blockchain ETFs and Bitcoin ETFs are considered the next big thing in the crypto world, however, both of them need to continually monitor their weak aspects to exceed their previous peak. They also need to keep upgrading to keep up with future trends. 

In general, we can claim that the new trend is of ‘Digital Currencies’ that have become an important thing for investors. 

If you still have doubts about why to invest in bitcoin or global blockchain technologies stock or how to invest in bitcoin ETF, then the only thing left is to find a trustworthy and reliable Blockchain company. 

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References 

About Oluwabunmi Ojo

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