Why bitcoin bust shouldn’t worry launch of Canada’s first blockchain ETF

Canada’s first blockchain exchange-traded fund shrugged off bitcoin’s bust to launch on Wednesday as planned.

Harvest Portfolios Group Inc’s Blockchain Technologies ETF traded on the Toronto Stock Exchange under the symbol HBLK, opening at CA$11.09 (US$8.83) and rising to CA$11.48 (US$9.14) by 10.20am New York time, before dropping to its original price by 3.20pm.

On Tuesday bitcoin tumbled to below US$6,000 before rebounding – a substantial drop from its from its all-time high of US$19,000 in mid-December.

But investors should not confuse Bitcoin’s bust with blockchain’s brighter future, analysts at Bloomberg Intelligence said. 

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As a technology, blockchain will evolve with new applications, increased transaction speeds and improved security, they said.

HBLK will invest in a cross-section of large, established companies and emerging businesses that are primarily involved in the development of blockchain technologies, the company said.

Its holdings include Hive Blockchain Technologies Ltd, Overstock.com Inc, BTL Group Ltd, and BIG Blockchain Intelligence Group Inc.

Three blockchain ETFs have been created in the US, although not without hiccups. Shortly before listing, the US Securities and Exchange Commission encouraged the firms behind the first two funds to drop “blockchain” from their names.

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The regulator may have been keen to avoid a repeat of recent incidents, like when drink company Long Island Iced Tea Corp changed its name to Long Blockchain Corp and saw its stock price almost triple in a day.

Two of the ETFs, which track companies involved in the digital technology that underpins cryptocurrency transactions, launched on January 17 as the Amplify Transformational Data Sharing ETF, and the Reality Shares Nasdaq NexGen Economy ETF. 

Buyers have already poured a combined US$264 million worth of assets into both, but they might actually just be paying a hefty price for some pretty basic technology stocks, including Intel, IBM and Nvidia.

The third fund, known by its ticker KOIN, began trading January 30. The Innovation Shares NextGen Protocol ETF uses “natural language processing” to scan news sources to determine sentiment and spot keywords so it can create a portfolio of as many as 60 stocks.

As of Tuesday, KOIN had about US$3.5 million in assets and was down 4.5 per cent since trading started.