WisdomTree has launched a new thematic equity ETF in Europe providing exposure to companies developing and utilizing blockchain technology.
The blockchain has been heralded as one of the most disruptive innovations in recent history
The WisdomTree Blockchain UCITS ETF has been listed on London Stock Exchange in US dollars (WBLK LN) and pound sterling (BKCN LN) as well as on Xetra (WBKN GY) and Borsa Italiana (WBLK IM) in euros.
The blockchain, a decentralized, distributed ledger that securely records digital transactions, is expected to be one of the most disruptive innovations in recent history due to its potential to impact business models across virtually all segments of the economy.
According to an analysis by Markets and Markets, the blockchain industry is expected to grow from $4.9 billion at the end of 2021 to $67.4bn by 2026, representing a compound annual growth rate of 68.4%.
Methodology
The fund is linked to the proprietary WisdomTree Blockchain UCITS Index which selects its constituents from a universe of stocks listed in developed and select emerging market countries. Chinese firms that maintain listings on developed market exchanges, or are available through the Stock Connect program, are eligible for inclusion.
The methodology screens out any company with a market capitalization below $150 million or an average daily trading volume less than $500,000.
WisdomTree identifies blockchain-related firms by utilizing a natural language procession algorithm to screen publicly available information such as financial news, business profiles, and company publications for appropriate keywords linked to this theme. Specifically, the process aims to identify two types of blockchain companies: Enablers and Engagers.
Blockchain Enablers refer to cryptocurrency miners as well as companies that are developing components for the blockchain ecosystem such as hardware and software infrastructure.
Blockchain Engagers refer to companies that provide blockchain and cryptocurrency services (such as consulting, software, and financial services) or those that have significantly adopted blockchain technology to improve net income through higher sales, enhanced efficiency, and lower costs.
Constituents in the index are equally weighted while capping the combined weight of Blockchain Enablers at 30%. According to WisdomTree, this weighting limit reflects the firm’s belief that miner rewards will decrease over time for several reasons including protocol setups such as halvings.
The ETF comes with an expense ratio of 0.45%, significantly cheaper than the Invesco CoinShares Global Blockchain UCITS ETF (BCHN LN), Europe’s largest blockchain thematic ETF, which houses $520m and comes with an expense ratio of 0.65%.
Pierre Debru, Head of Quantitative Research & Multi-Asset Solutions, Europe, WisdomTree, said: “Because of their high growth potential, investors often see investment in digital assets or blockchain-related assets as a thematic investment. This is a good paradigm to adopt to conceptualize investing in the space. The variety of applications and use cases for blockchain are becoming more apparent and can be seen across entertainment, cloud storage, and gaming, amongst others. While Bitcoin was the first blockchain created and aimed to be a revolutionary payment system, the ecosystem has evolved far and wide outside the ‘payment sphere’. Over the years, the idea of blockchain has been extended to support smart contracts and record keeping of Non-Fungible Tokens (NFTs). The future looks bright for companies involved in the blockchain, even if we are at the early stages of proliferation.”
Alexis Marinof, Head of Europe, WisdomTree, added, “WBLK combines our expertise in self-indexing with our in-depth knowledge of the digital asset and blockchain ecosystems, providing investors with pure exposure to this disruptive technological megatrend. The ETF is a natural evolution of our multi-award-winning thematic ETF platform and has strong synergies with our crypto asset ETP platform. We believe that blockchain is a transformative technology that has the potential to disrupt industries and enable new business models. The potential applications of the technology are endless, and we expect to see new use cases for blockchain emerge over the coming decades.”