13th May 2022
- Financial technology companies like Coinbase, Block, and Silvergate Capital are betting big on blockchain, and showing signs of significant growth
- SBI Holdings’ new offering may break down some of the barriers for crypto in Japan.
- DraftKings stock is inexpensive and shows a lot of growth potential; eBay is leveraging its platform and audience to break into the world of NFTs.
- Blockchain ETFs offer a way to dive into the blockchain world while mitigating the risk of any individual stock.
It’s taken investors time to warm up to the idea of blockchain of all types, from cryptocurrencies to NFTs. The backbone of the emerging crypto space, blockchain is the technology that makes the trustless peer-to-peer exchanges possible. Blockchain is an append-only, database of time-stamped interactions that cannot be altered. It is a censorship-resistant, decentralized ledger of transactions that are verified by a network of computers and added as a “block” to the chain. Bitcoin was the first decentralized digital currency to exist on a blockchain, and has since been followed by numerous other currencies and applications.
But while some are still brushing up on their crypto definitions, no investor could remain apathetic as Bitcoin values soared to unprecedented levels of over $65,000 USD per coin at several points in February, April, and November 20211. Although they stabilized within a short time, values remained high and offered far better returns overall than stock market averages. That left a lot of investors considering an investment in blockchain stocks for the first time.
The big question for most investors is—what blockchain technology stocks are worth investing in? What are the best blockchain stocks? While there is no clear-cut answer to those questions, and no guarantees for any investment, we’ve put together a list of some of the blockchain stocks that are definitely worth paying attention to in the coming months.
Coinbase is a financial technology company that focuses on building the crypto economy. Its stats are almost unprecedented—89 million users and 115,000 partners in the crypto ecosystem (i.e., all the applications building on blockchain cryptography) from over 100 countries2. Not satisfied to rest on their laurels with those amazing numbers, in January 2022 the company announced the expansion of its offering with the purchase of FairX3, a young company launched in June 2021 that sells blockchain futures products.
By purchasing FairX, which is regulated by the U.S. Commodity Futures Trading Commission (CFTC), Coinbase is both diversifying its offerings and making the derivatives market accessible to millions of customers in the U.S. That’s definitely something worth watching…
Block is a tech company that focuses on financial services and has developed tools like Cash App, Square, Spiral, and TIDAL to help users navigate various parts of the economy and grow their businesses. The company, owned by Jack Dorsey, recently changed its name from Square to Block, possibly indicating that it plans to increase its focus on the blockchain economy. In January 2022, Block confirmed that it is building an open Bitcoin mining system that may enable anyone to mine Bitcoin from home4. With many experts betting that Bitcoin will be the internet’s dominant cryptocurrency, it may be an incredibly important tool to have under your belt in the future.
Silvergate Capital is a bank that provides financial infrastructure solutions and services to the digital currency industry. Its services include the Silvergate Exchange Network (SEN), which is an almost instantaneous payment network for the digital currency industry. The company also offers commercial banking and lending services.
Silvergate Capital drew a lot of attention when its stock rose more than 85% during 2021, despite the cryptocurrency volatility. Then, in December 2021 Silvergate Capital and EJF Capital LLC announced the launch of the EJF Silvergate Ventures Fund5, a joint investment vehicle that focuses on early-stage fintech companies, digital currencies, and payments, as well as specialty finance technology. Given the growth and growing popularity of these in today’s economy, Silvergate Capital is likely to have its hands in some interesting projects in the coming months and years.
SBI Holdings Inc. is a Japanese financial conglomerate that launched Japan’s first cryptocurrency fund in December 2021.6 Japan has tight regulations for digital currencies so investment in blockchain has been slower there than in many other countries to date. Yet there is a growing interest in investment in digital assets in Japan, and SBIs cryptocurrency fund may be exactly the tool to turn the interest into investments.
The fund aims to give individual investors a way to diversify their traditional portfolio with investments in cryptocurrencies like Bitcoin, Ethereum, XRP, Bitcoin Cash, Litecoin and others. It’s targeting serious investors—there is a minimum investment of roughly 1-3 million yen ($9,000-$27,000).
Tomoya Asakura, president of SBI affiliate Morningstar Japan K.K., says that he aims to use the fund to demonstrate to both the public and regulators that adding cryptocurrencies contributes to a more resilient portfolio because they often move inversely to stocks and other traditional investments7. If he succeeds in his goal, this may an interesting fund to watch.
DraftKings is an online gaming giant that operates fantasy sports contests and sports betting. In the past, sports betting was only allowed in specific locations in the United States, and long, inconvenient trips were necessary for anyone who wanted to take part, which really limited the market.
However, that’s slowly changing with a trend towards the legalization of online sports growing through the country. Although DraftKings stock dropped in value significantly in 2021, the company continued to demonstrate growth. It expanded to new states, including high revenue potential New York, which could fuel future growth for DraftKings, as could expansion to additional states in the future. Buying in now, when the stock is priced relatively low, compared to its all-time closing high of over $71 per share on March 19, 2021, according to NASDAQ, could lead to profits in the future if the company continues to grow and expand.
eBay was a pioneer in the early aughts, shattering many perceived boundaries to online commerce. Now, it’s looking to leverage its established platform to break into the world of blockchain. In May 2021, eBay announced that it would start selling non-fungible tokens, or NFTs through its marketplace8.
eBay based its business model on physical collectibles, so it makes sense for the company to expand into digital collectibles as well. And with so many users already on the platform, there’s a captive audience positioned to engage with emerging blockchain technology.
Another way to approach the market — a blockchain ETF
No matter how much research you do, any individual stock is inherently risky. In a volatile field like cryptocurrencies, risk is part of the deal. For many people, that’s makes it a deal-breaker. Yet forgoing the risk means forgoing the potential, leaving many investors in a dilemma.
One way to manage the dilemma is by investing in a blockchain ETF, or Exchange-Traded Fund, rather than a simple stock. A blockchain ETF effectively enables you to invest in several different companies in the crypto ecosystem rather than focusing on a single company. You can buy and sell it like a stock, but its net asset value is linked to the value of its composite stocks, which in the case of a passively managed ETF, tracks the performance of an index comprised of publicly listed companies with relevant thematic exposure.
Blockchain company-based ETFs are positioned to capture potential profit in an industry that is showing extreme potential. Like many ETFs, blockchain ETFs and those with blockchain as well as other company exposure, like Defiance’s NFTZ, promote an investment strategy that provides a diversified and thematic exposure to this sector as well as other emerging technologies, while mitigating the risk of buying an individual stock So, if you don’t know how to evaluate the best tech ETFs, or have the patience or the stomach to track the ups and downs of an individual stock, an ETF, which has blockchain and other thematic exposures like Defiance’s NFTZ may be worth a closer look
For current performance and holdings, please visit defianceetfs.com/NFTZ
1 “Bitcoin (BTC) price per day from October 2013 to February 24, 2022”, February 2022 https://www.statista.com/statistics/326707/bitcoin-price-index/
3 “Coinbase Buys FairX to Launch Crypto Derivatives”, January 12, 2022, https://www.coindesk.com/business/2022/01/12/coinbase-buys-fairx-to-launch-crypto-derivatives-offering/
4 “Jack Dorsey: Block is ‘officially building an open bitcoin mining system’”, January 13, 2022, https://www.cnbc.com/2022/01/13/jack-dorsey-block-officially-building-an-open-bitcoin-mining-system.html
5 “Silvergate and EJF Capital Form Joint Fintech Venture Fund”, December 16, 2021, https://www.businesswire.com/news/home/20211216005372/en/Silvergate-and-EJF-Capital-Form-Joint-Fintech-Venture-Fund
7 “First Crypto Fund in Japan Targets Long-Term Retail Investors”, September 2, 2022, https://www.bloomberg.com/news/articles/2021-09-02/first-crypto-fund-in-japan-targets-long-term-retail-investors?sref=3REHEaVI
8 “eBay and digital collectibles: our tech-led reimagination continues”, May, 11 2022 ”https://community.ebay.com/t5/Announcements/eBay-and-digital-collectibles-our-tech-led-reimagination/ba-p/31861893