<\/p>\n
Compared to competing funds \u2014 and even to bitcoin itself \u2014 the largest blockchain ETF has had subdued year-to-date returns. That is in part by design.<\/p>\n
Still, the Amplify Transformational Data Sharing ETF (BLOK) is ready to capture the upside of a potential bitcoin rally, according to fund portfolio manager Dan Weiskopf.\u00a0<\/p>\n
\u201cI actually am very optimistic about the price action that I\u2019m seeing in the way of bitcoin,\u201d he said. \u201cTo some degree we have a built-in hedge with our exposure to MicroStrategy and the miners if the economy falls apart and bitcoin rallies.\u201d<\/p>\n
BLOK, which launched in January 2018, currently has $410 million assets under management.\u00a0<\/p>\n
The fund\u2019s position in MicroStrategy represented 4.89% of the portfolio on Friday \u2014 BLOK\u2019s second-largest holding, behind only Coinbase. Used by many investors as a way to gain exposure to bitcoin<\/a>, MicroStrategy held<\/a> 158,245 bitcoin (BTC<\/a>), as of Sept. 24.\u00a0<\/p>\n About 18% of the fund\u2019s assets were allocated to bitcoin miners, as of earlier this week, Weiskopf noted. The fund\u2019s allocation to miners peaked at roughly 30% in October 2021 and has gotten as low as about 9%, he said.<\/p>\n Its largest miner positions \u2014 each between 3% and 4% \u2014 are in Riot Platforms and CleanSpark.\u00a0<\/p>\n Read more:<\/strong> Inside BLOK ETF: \u2018We use the miners to play offense and defense\u2019<\/a><\/p>\n Year to date, BLOK is up about 29%. This is significantly below the performance of some other funds targeting equities in the segment, as well as bitcoin\u2019s 61% price jump from the start of 2023.<\/p>\n The Valkyrie Bitcoin Miners ETF (WGMI) and the VanEck Digital Transformation ETF (DAPP) have returned about 100% and 97%, respectively, over that span, according<\/a> to ETF Database.\u00a0<\/p>\n \u201cThe funds that are passively managed have very high concentration risk, which is good when things go well,\u201d Weiskopf told Blockworks. \u201cBut when they don\u2019t go so well, you\u2019re taking on a lot of risk.\u201d<\/p>\n WGMI\u2019s top five holdings accounted for about 50% of the portfolio Friday, while DAPP\u2019s top five holdings amount to about 37% of the fund\u2019s assets.\u00a0<\/p>\n The top five equities in BLOK, meanwhile, represent 22% of the portfolio. Coinbase is the top position at 4.95%.<\/p>\n \u201cWe\u2019re long Coinbase<\/a>\u2026but we have managed that exposure down,\u201d he said. \u201cI think not being too top-heavy in any one name is important in a very high-beta investment strategy.\u201d\u00a0<\/p>\n Keep reading for more excerpts from Blockworks\u2019 interview with Weiskopf.<\/p>\n ________________________________________________________________________<\/p>\n Blockworks: <\/strong>How might you look to position BLOK\u2019s portfolio ahead of the bitcoin halving<\/a> (an event slated for April 2024 at which time per-block rewards for miners are cut in half)<\/em>?<\/p>\n Weiskopf: <\/strong>If you look at the halving, if history repeats itself, you could see a major move in bitcoin. You almost have to be anticipating a major move in bitcoin if you\u2019re long the miners at all.<\/p>\n History repeats itself sometimes, and the delta on the miner would be more than what the price of bitcoin would be.<\/p>\n I don\u2019t think you should expect us to increase the miners more than where we are right now. We feel pretty good about our position. But if we do, it will be incremental, or potentially adding one more bitcoin miner.<\/p>\n Blockworks: <\/strong>Do you expect to see a spot bitcoin ETF<\/a> in the US?\u00a0<\/p>\n Weiskopf:<\/strong> I still think that all this back-and-forth between the [US Securities and Exchange Commission] is a positive thing, not a negative thing. It can\u2019t be ignored; people and institutions want access to this asset class.<\/p>\n Whether it happens as a launch in the first quarter or later in 2024, I don\u2019t know. But I\u2019m definitely optimistic around it because of what we\u2019re hearing.<\/p>\n What it will mean is there will be more demand. You can make up numbers the same as I can. But when you factor in that bitcoin supply is shrinking in terms of what\u2019s coming out of the miners and you see more demand from some of the big names\u2026whether it\u2019s BlackRock or Franklin Templeton\u2026they\u2019re doing it because they think there\u2019s demand<\/a>.<\/p>\n Blockworks: <\/strong>How might spot bitcoin ETF approval impact demand for BLOK?<\/p>\n Weiskopf:<\/strong> I think they definitely both can co-exist. Our emphasis is on the blockchain and companies are trying to capitalize on the trend. Franklin Templeton, as an example, has a $300 million money market fund that\u2019s on-chain. If they were to launch an ETF, we\u2019d get the benefit of that probably through the actual equity in terms of asset growth.<\/p>\n BLOK had a 0.95% position in Franklin Templeton on Friday.<\/em><\/p>\n In the context of would one own BLOK and crypto directly, yeah I think that investors [who are] looking for that exposure could own both because they\u2019re maybe correlated but their return streams may be different.\u00a0<\/p>\n The blockchain is the technology and spot is more of the direct exposure. The disruption within the industries will be felt through the equities more than the direct spot.<\/p>\n Don\u2019t miss the next big story \u2013 join our\u00a0free daily newsletter<\/a>.<\/strong><\/p>\n
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