Ignoring disruptive blockchain companies is a ‘fundamental mistake’: Boost ETFs

There is still reason for hope for institutional investors seeking more exposure to crypto – even as regulators continue to clamp down on the industry, most recently with the US Securities and Exchange Commission (SEC) suing both Binance and Coinbase within 24 hours, sending prices crashing .

According to Dan Weiskopf and Mike Venuto, portfolio managers at Amplify ETF, the near-term growth outlook for companies today is indeed “unclear and challenging,” but the good news is that “growth looks cheaper today than in years past.”

“We believe disruptor companies are for sale for now, and long-term investors who are not looking closely to capture the inevitable transformational change from blockchain and digital assets are simply missing the most important paradigm shift in decades,” Weiskopf and Venuto wrote in their latest newsletter .

Weiskopf and Venuto are responsible for the Transformational Data Sharing ETF (BLOK) at Amplify, which made a strategic decision to increase the portfolio’s net exposure to Bitcoin miners to as much as 22% – helping BLOK grow more than 31% a year . to date.

“What we can’t do is be too extreme where we miss a rally, I think you should be in it for the long term,” Weiskopf said in an interview with Decrypt. “Everyone should be involved in the blockchain because it is going to be disruptive across so many different industries. So many different companies, not taking that into account is a really fundamental mistake.”

BLOK, traded on the NYSE Arca, is an exchange-traded fund that focuses on investing in companies involved in blockchain technology and cryptocurrencies, or, as the fund calls it, the disruptive sector.

“Our mandate is to be invested in companies that are involved with a very high beta,” Weiskopf said Decrypt. “Call it an asset class, call it a growth area, call it disruption, whatever you want to call it, we have to be true to that mandate.”

To achieve this goal, BLOK’s holdings include shares in MicroStrategy, Galaxy Digital, Coinbase and Block, as well as leading Bitcoin mining companies, such as Riot Platform, Marathon Digital, CleanSpark, Hut 8, among others.

Since the start of the year, Riot and Marathon saw their shares rise by 190% and 150% respectively, while other Bitcoin miners in Blok’s portfolio were also safe in the green.

But will this momentum last long? And what about risk management?

“Because we’re an active fund, our exposure to the miners can move up and down,” Weiskopf said Decrypt. “We’ve been as high as 30% and as low as 9.5% – so I’d say we were overweight to miners, but we’re not quite geared towards our maximum exposure in the miners.”

Regulators need something to regulate, says Weiskopf

While Bitcoin miners appear to be a winning bet for BLOK, at least based on this year’s results, another important part of the fund’s portfolio has significant exposure to companies involved in the transactional aspects of the blockchain industry, such as Coinbase, PayPal and Robinhood.

Coinbase was hit with an SEC lawsuit earlier today, accusing the San Francisco-based company of violating securities laws. To little surprise, the news sent Coinbase’s shares tumbling down the charts.

For BLOK portfolio managers, this was not entirely unexpected, as they warned last month that “even bulls must be concerned that either regulatory pressure in the US suppresses Coinbase’s valuation (smells a discount), or worse – Coinbase’s management will be discouraged from innovate.”

“Coinbase is our core holding. We trimmed it back a bit when the Wells warning came, and it wasn’t a surprise to us, says Weiskopf.

The funny thing about the transactional side of things, according to him, is that whether they target Galaxy or Coinbase doesn’t matter.

“It’s not going to be pretty, but they need something to regulate. I don’t doubt Coinbase at all, but I don’t know what the government is going to do,” Weiskopf said, adding that BLOK will manage risk appropriately, sizing from a business model.