If there's one asset class captivating investors these days, it's cryptocurrency. Led by Bitcoin, digital currencies – the credible ones at least – are taking the financial world by storm.
Data confirm investors, including plenty of retail market participants, are actively engaging in the crypto universe. However, as Bitcoin's often wild moves indicate, crypto isn't for everyone. Certainly not jittery, risk-averse investors. That doesn't mean those market participants shouldn't have access to some of the upside offered by digital assets.
The VanEck Vectors Digital Transformation ETF (DAPP) is a new exchange traded fund that provides that access via equities. A simple way of viewing DAPP is that the rookie fund builds on the concepts set forth by older though still thriving blockchain ETFs.
DAPP, which debuted last week, follows the MVIS Global Digital Assets Equity Index. The benchmark “is intended to track the performance of companies that are participating in the digital assets economies,” according to VanEck.
DAAP Fills Important Void
Whereas many legacy blockchain ETFs, particularly passive funds, are rely heavily on tech stocks – mature ones at that – as primary drivers of returns, DAPP offers an evolved, relevant approach that includes blending traditional technology and fintech equities.
That methodology is important at a time when more companies are viewing Bitcoin as an asset worthy of inclusion on corporate balance sheets. For example, MicroStrategy (MSTR), Square (SQ) and Tesla (TSLA) combine to hold $7.6 billion worth of Bitcoin on their balance sheets. DAPP taps into that theme by allocating 9.11% of its weight to Square and almost 5% to MicroStrategy, respectively, – two of the largest allocations to those names among all ETFs.
That's just one indication that DAPP is a valid option for investors looking for equity-based exposure to digital assets and it's good time to be doing just that.
“The opportunity set of publicly traded, pure-play digital transformation companies is still young, but has grown in both size and revenues over the last few years,” according to VanEck research. “Despite underlying volatility in digital assets themselves, many publicly traded companies are investing heavily in new business lines to position themselves favorably as digital asset usage and adoption continues to accelerate.”
Spreading Digital Bets
In lieu of dedicated Bitcoin ETF, prospects for which remain murky, using stocks to tap into the digital transformation is a credible, comfortable approach for many investors and that speaks to the utility of DAPP.
“The digital transformation is underway. In recent years, digital assets have started to mature, evidenced by increased global adoption by both retail and institutional investors,” adds VanEck. “Against this backdrop, we believe that companies involved in the digital transformation of the global economy represents a long-term structural growth opportunity that is becoming more and more accessible to investors.”
To adequately benefit from those trends, investors should require a level of relevance and diversification not always found in old guard funds.
For its part, DAPP features exposure to banks and asset managers, crypto custodians and miners, exchange operators, hardware companies, holders of digital patents and payment gateway firms. That's a strong foundation for participation in a transformative industry.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.