VanEck has launched a new thematic equity ETF in the US providing exposure to companies engaged in the mining of digital assets.
The ETF provides exposure to companies worldwide that are involved in the mining of digital assets.
The VanEck Digital Assets Mining ETF (DAM US) has been listed on the Nasdaq Stock Market with an expense ratio of 0.50%.
The mining of digital assets is a critical element of blockchain technology. Digital asset mining companies use specialized computer chips in conjunction with software to solve complex math problems and, by doing so, transactions that exist on the blockchain are verified.
“Blockchains introduce transparency, efficiency, and lower costs compared to traditional centralized databases and processes, but without miners, blockchain transactions cannot be verified and audited, making their role absolutely essential,” said Ed Lopez, Head of Product Management at VanEck.
Digital assets miners represent the largest segment of companies operating within the crypto economy, accounting for more than half the weight of the MVIS Global Digital Assets Equity Index. The index underlies the $50 million VanEck Vectors Digital Transformation ETF (DAPP US) which launched in April 2021 with an expense ratio of 0.50%.
Due to the essential nature of digital asset mining operations to blockchain technology, VanEck launched DAM to offer investors a more targeted play on this segment.
Lopez added: “Though fast-growing, many of the leaders in the digital asset mining category remain in the early stages of their growth. That factor, combined with sustained, high current levels of demand for all types of digital assets, make this a compelling time for us to be launching DAM to focus specifically on digital assets miners.”
Neither DAM nor DAPP invests in digital assets directly or indirectly through the use of digital asset derivatives.
Methodology
DAM is linked to the MVIS Global Digital Assets Mining Index which selects its constituents from a universe of developed and emerging market stocks with market capitalizations greater than $150 million and average daily turnover above $1m.
The methodology screens for companies that derive at least 50% of their revenue from the mining of digital assets or from providing hardware, software services, or other technologies to digital asset mining companies. Pre-revenue companies that have the potential to generate at least 50% of their revenues from these activities are also eligible for inclusion.
If the index contains less than 25 stocks, the methodology will also include ‘auxiliary’ firms that generate 50% of their revenues from other digital asset-related projects such as digital asset exchanges, payment gateways, software services, and infrastructure businesses, until the minimum constituent count is reached.
Constituents are weighted by float-adjusted market capitalization while capping the weight of any digital asset mining company at 10%, the weight of any auxiliary firm at 4.5%, and the combined weight of all auxiliary companies at 20%.
As of 8 March 2022, stocks from the US accounted for half (51.0%) of the total index weight with the next-largest country exposures being Canada (21.7%), China (9.8%), and Australia (9.3%).
Information technology stocks dominated with a combined weight of 88.6% with the remaining exposure allocated to financials at 11.4%.
Notable positions included Riot Blockchain (11.4%), Hut 8 Mining (8.8%), Marathon Digital (8.3%), Iris Energy (7.4%), Canaan Creative (6.6%), Hive Blockchain (6.2%), and Bitfarms (5.5%).