Values of Two New ETFs Blow Up from Investor Frenzy
The Securities and Exchange Commission turned down a dozen companies’ applications to launch Exchange Traded Funds, or ETFs, based on blockchain technology, but at least two companies’ ETFs survived. According to a story entitled, “With Blockchain ETFs, Old Wine in New Bottles,” by Avi Salzman in Barron’s magazine.
“Blockchain has taken on the same magical quality as bitcoin, with companies using it as a buzzword they know will appeal to investors—a turbocharger to turn a boring business into a rocket ship. Investors have rushed into the two blockchain ETFs, from Reality Shares and Amplify ETFs, since their launch on Jan. 17. By Friday, they were together managing more than $250 million in assets, an astonishing rate of growth.”
ETFs are considered a safer bet as a financial stock than a basic “Bitcoin” type of cryptocurrency, but the SEC is concerned about the viability of many of the ETFs, which are hyped to speed up trade settlement and simplify record keeping. If companies like Walmart, which is testing blockchain for tracking its food supply chain, decide that the tech solves their problems, then the company providing it may have the potential to achieve what some perceive as overinflated valuations. The SEC has actually blocked use of the ETF acronym from the name of startups that only have a tangential connection with the technology. As Kian Salehizadeh, senior analyst at Reality Shares explained, the SEC believed his fund’s name “Reality Shares Nasdaq NextGen Economy ETF” (BLCN) could cause “irrational exuberance” because it included the term ETF. Perhaps it already has, since the fund is their biggest fund “by a wide margin” according to Reality Shares.
The other blockchain start-up, the Amplify Transformational Data Sharing ETF (BLOK), raised more than $100 million in five trading days, tying a record set by another ETF launch, the Alternative Harvest ETF (MJX), which is connected to marijuana. That ETF already had funds in it, which had been converted from a Latin American real estate fund, according to a story in SeekingAlpha.com, written by Jane Edmundson:
“BLOK may end up being the true record holder. Yes, that’s right, as an ETF theme, blockchain may be more popular than pot!”
At last check, the Amplify ETF surpassed $174 million in investment.