Bitcoin Isn't Moving Much, But Cash Is Pouring Into Blockchain ETFs
Bitcoin ETFs (exchange-traded funds) could still be a long way from listing on the major exchanges, especially since the Securities and Exchange Commission has recently expressed serious concerns about cryptocurrencies as an asset class. However, blockchain ETFs have launched and investors seem very interested; millions of dollars are flowing into them already.
Let's look at today's cryptocurrency prices, and a possible exchange hack that is putting pressure on two major cryptocurrencies. We'll also discuss what a blockchain ETF is and what it invests in.
Today's cryptocurrency prices
Most of the major cryptocurrencies are little changed on Friday. In fact, the only move greater than 1% in the top five cryptocurrencies is in Ripple (XRP-USD). Here are the largest cryptocurrencies by market capitalization, and how much each has changed over the past 24 hours:
Ripple (XRP-USD) has been a major laggard recently. The cryptocurrency, which gained notoriety for its partnerships with companies like American Express and MoneyGram International, traded for as much as $1.70 last Friday, and now trades for 28% less.
The likely reason for the drop is the news that Tokyo-based cryptocurrency exchange Coincheck abruptly halted withdrawals earlier today. Rumors indicate that the exchange was hacked and could have lost hundreds of millions of dollars worth of cryptocurrencies -- particularly NEM, down 6.9% today, and Ripple (XRP-USD).
$240 million flows into blockchain ETFs in one week
A couple of blockchain-based ETFs launched last week, and to say that investors seem interested is an understatement. Since their launch, about $240 million has flowed into the two new funds.
So what is a blockchain ETF? Instead of investing in cryptocurrencies like bitcoin, blockchain ETFs invest in the stocks of companies that have substantial investments in, or involvement with, blockchain technology.
Here are a few examples of the holdings of these young ETFs, and why each one is included:
- Overstock.com: Overstock was one of the first online retailers to accept bitcoin several years ago, and it's actively involved in the blockchain industry. The company has an entire division focused on blockchain projects, and it recently announced a partnership with Siebert Financial to offer low-cost brokerage services, which may include cryptocurrency trading.
- IBM: IBM has several blockchain projects, including a partnership with Stellar to develop a real-time payments system.
- Square: Payment-processing company Square recently began experimenting with bitcoin purchases in its Square Cash app.
Notice that stocks like the Bitcoin Investment Trust and Riot Blockchain are not included. The new ETFs are not aiming to invest in cryptocurrencies themselves or funds that own them; nor are they speculating on unproven companies that have the word "blockchain" in their names. Rather, these ETFs are intended as investments focusing on established companies that could benefit from advances in blockchain technology.
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Matthew Frankel owns shares of American Express and Square. The Motley Fool owns shares of Square. The Motley Fool recommends American Express. The Motley Fool has a disclosure policy.