WisdomTree launches blockchain industry ETF | ETF strategy
WisdomTree has launched a new thematic equity ETF in Europe that provides exposure to companies developing and using blockchain technology.
The blockchain has been touted as one of the most disruptive innovations in recent history
The WisdomTree Blockchain UCITS ETF has been listed on London Stock Exchange in US dollars (WBLK LN) and pound sterling (BKCN LN) as well as on Xetra (WBKN GY) and Borsa Italiana (WBLK IM) in euros.
The blockchain, a decentralized, distributed ledger that securely records digital transactions, is expected to be one of the most disruptive innovations in recent history due to its potential to impact business models across virtually every segment of the economy.
According to an analysis by Markets and Markets, the blockchain industry is expected to grow from $4.9 billion by the end of 2021 to $67.4 billion by 2026, representing a compound annual growth rate of 68.4%.
Methodology
The fund is linked to the proprietary WisdomTree Blockchain UCITS Index which selects its constituents from a universe of shares listed in developed and selected emerging market countries. Chinese firms that maintain listings on developed exchanges, or are accessible through the Stock Connect program, are eligible for inclusion.
The method screens out any company with a market capitalization of less than $150 million or an average daily trading volume of less than $500,000.
WisdomTree identifies blockchain-related firms by using a natural language processing algorithm to screen publicly available information such as financial news, business profiles and company publications for appropriate keywords related to this topic. Specifically, the process aims to identify two types of blockchain companies: Enablers and Engagers.
Blockchain Enablers refer to cryptocurrency miners as well as companies that develop components for the blockchain ecosystem such as hardware and software infrastructure.
Blockchain Engagers refers to companies that provide blockchain and cryptocurrency services (such as consulting, software, and financial services) or those that have significantly adopted blockchain technology to improve net income through higher sales, increased efficiency, and lower costs.
The components of the index are equally weighted, while the overall weight of Blockchain Enablers is limited to 30%. According to WisdomTree, this weighting limit reflects the firm’s belief that miner rewards will decline over time for several reasons, including protocol setups such as halvings.
The ETF comes with an expense ratio of 0.45%, significantly cheaper than Invesco CoinShares Global Blockchain UCITS ETF (BCHN LN)Europe’s largest blockchain-themed ETF, housing $520 million and coming with an expense ratio of 0.65%.
Pierre Debru, Head of Quantitative Research & Multi-Asset Solutions, Europe, WisdomTree, said: “Due to their high growth potential, investors often see investments in digital assets or blockchain-related assets as a thematic investment. This is a good paradigm to adopt to conceptualize investment in the space. The variety of applications and use cases for blockchain is becoming more apparent and can be seen across entertainment, cloud storage and gaming, among others. While Bitcoin was the first blockchain to be created and aimed to be a revolutionary payment system , the ecosystem has evolved far and wide beyond the ‘payments sphere’. Over the years, the idea of blockchain has been expanded to support smart contracts and the record keeping of Non-Fungible Tokens (NFTs). The future looks bright for companies involved in blockchain, even whether we are in the early stages of proliferation.”
Alexis Marinof, Head of Europe, WisdomTree, added: “WBLK combines our expertise in self-indexing with our in-depth knowledge of the digital asset and blockchain ecosystems, providing investors with pure exposure to this disruptive technology megatrend. The ETF is a natural evolution of our multi-award winning thematic ETF- platform and has strong synergies with our crypto-asset ETP platform. We believe that blockchain is a transformative technology that has the potential to disrupt industries and enable new business models. The potential uses of the technology are endless and we expect to see new use cases for blockchain emerge in the coming decades.”
