wisdom tree has launched a new thematic equity ETF in Europe, offering exposure to companies developing and deploying blockchain technology.
That WisdomTree Blockchain UCITS ETF was listed on London Stock Exchange in US dollars (WBLKLN) and pounds sterling (BKCNLN) as well as on Xetra (WBKN GY) and Borsa Italiana (WBLK IM) in Euro.
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 in virtually every segment 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 $67.4 billion by 2026, at a compound annual growth rate of 68.4%.
The fund is linked to the property WisdomTree Blockchain UCITS Index which selects its constituents from a universe of equities listed in developed and selected emerging markets. Chinese companies listed on stock exchanges in developed markets or available through the Stock Connect program are eligible for inclusion.
The methodology filters out all companies with a market cap of less than $150 million or an average daily trading volume of less than $500,000.
WisdomTree identifies blockchain-related companies by using a natural language processing algorithm to search publicly available information such as financial news, business profiles, and company publications for appropriate keywords associated with that topic. Specifically, the process aims to identify two types of blockchain companies: enablers and engagers.
Blockchain enablers refer to cryptocurrency miners as well as companies 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 that have adopted blockchain technology on a significant scale to improve bottom line through increased sales, improved efficiency, and lower costs.
The constituents of the index are weighted equally, while the combined weight of blockchain enablers is capped at 30%. According to WisdomTree, this weight cap reflects the company’s belief that miner rewards will decrease over time for a number of reasons, including protocol setups like halvings.
With an expense ratio of 0.45%, the ETF is significantly cheaper than the Invesco CoinShares Global Blockchain UCITS ETF (BCHN LN)Europe’s largest thematic blockchain ETF, housing $520 million and has an expense ratio of 0.65%.
Pierre Debru, Head of Quantitative Research & Multi-Asset Solutions, Europe, WisdomTree, said: “Due to their high growth potential, investors often see investments in digital assets or blockchain-related assets as a thematic investment. This is a good paradigm to conceptualize investments in the space. The variety of applications and use cases for blockchain is becoming increasingly evident and is evident in entertainment, cloud storage, and gaming, among others. While Bitcoin was the first blockchain to be created and aimed to be a revolutionary payment system, the ecosystem has evolved far and wide outside of the “payments sphere”. Over the years, the blockchain idea has been expanded to support smart contracts and the recording of Non-Fungible Tokens (NFTs). The future looks bright for companies involved in blockchain, even though we are in the early stages of adoption.”
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, offering investors direct access 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 blockchain is a transformative technology that has the potential to revolutionize industries and enable new business models. The uses of the technology are endless, and we expect new use cases for blockchain to emerge in the coming decades.”