Although the investment landscape has changed significantly in recent years, one thing holds true: digital assets are growing in popularity. From cryptocurrencies to NFTs, digital assets are continuing to gain traction despite ongoing volatility.
If you’re considering expanding your investment mix, digital assets could be an important addition. Below, we highlight some key things to consider and an alternative way to incorporate them into your portfolio.
The Digital Asset Landscape Extends Far Beyond Cryptocurrencies
While currencies such as Bitcoin, Ethereum, and Cardano are often considered to be the primary digital investment opportunities, the ecosystem is much broader—and more robust. Non-fungible tokens (NFTs), payment gateways, and digital asset mining companies each provide distinctive options for investors.
Although some of these opportunities are newer than others, they have nevertheless attracted significant attention in recent years. One of the reasons for this is that they serve as alternatives to more traditional assets such as stocks and bonds, and they can be a helpful way to increase portfolio diversification.
Digital Asset Mining Companies Offer Unique Opportunities
Encompassing more than 50% of the digital assets ecosystem, mining companies play an important role in how digital assets are created and distributed. Miners secure, record, and store data on the blockchain, playing a key role in validating and processing blockchain transactions. They are also crucial in the growth of the industry and its trajectory. Many of the transactions related to cryptocurrencies would not be possible without digital asset miners.
Some common types of digital asset miners include:
- Hardware providers
- Software providers
- AI-focused companies
It’s important to note that while these companies have many similarities, they also have certain key differences. Focusing on broader investment opportunities is one of the best ways to tap into their full potential.
ETFs Provide Broader Exposure to Digital Assets
With multiple holdings in the digital mining and crypto spaces, exchange-traded funds (ETFs) can be a great way to align with companies that play a crucial role in the digital asset economy. These include companies that are involved in the growth of digital currencies, as well as companies that are streamlining the mining process. And since ETFs are passive investments, investors don’t need to be actively involved in the management of their investments.
One such option is the VanEck Digital Assets Mining ETF (DAM). This recently established fund includes 25 holdings and focuses specifically on companies within the MVIS Global Digital Assets Mining Index.
Launched in March of this year, the fund offers annual distributions and includes total net assets of $2.6 million. It also spans holdings from the information technology and financial sectors, and nearly 50% of its holdings are companies from outside the U.S. What’s more, DAM offers the chance to invest in the companies that are directly shaping the digital landscape.
As digital assets continue to grow in popularity, one thing is for sure: investors of all ages are becoming more interested in adding them to their portfolios, a trend that will most likely increase in the coming years. By having a clear sense of your financial goals and considering a range of investments, you can tap into the full potential of digital assets while also managing the risk associated with these types of investments.
The information herein represents the opinion of the author(s), an employee of the advisor, but not necessarily those of VanEck.
The Fund will not invest in digital assets (including cryptocurrencies) (i) directly or (ii) indirectly through the use of digital asset derivatives. The Fund also will not invest in initial coin offerings. Therefore the Fund is not expected to track the price movement of any digital asset.
Investors in the Fund should be willing to accept a high degree of volatility in the price of the Fund’s Shares and the possibility of significant losses. An investment in the Fund involves a substantial degree of risk. An investment in the Fund is not a deposit with a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Therefore, you should consider carefully various risks before investing in the Fund, each of which could significantly and adversely affect the value of an investment in the Fund.
An investment in the Fund may be subject to risks which include, among others, risks related to investing in digital asset miners, investing in equity securities, Canadian issuers, small- and medium-capitalization companies, information technology and financials sectors, foreign securities, depository receipts, market, operational, index tracking, authorized participant concentration, new fund, absence of prior active market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares, non-diversified and concentration risks which may make these investments volatile in price or difficult to trade. Small- and medium-capitalization companies may be subject to elevated risks.
Digital asset miners and other hardware necessary for digital asset mining are subject to the risk of malfunction, technological obsolescence, the global supply chain issues and difficulty and cost in obtaining new hardware. Malfunctions and normal wear and tear will, at any point in time, cause a certain number of digital asset miners to be taken off-line for maintenance or repair. Any major digital asset miner malfunction could cause significant economic damage. The physical degradation of miners will require replacement of miners. Additionally, as technology evolves, there may be a need to acquire newer models of miners to remain competitive, which can be costly and may be in short supply. Given the long production period to manufacture and assemble digital asset miners and the current global semiconductor chip shortage, there can be no assurance that miners can acquire or maintain enough digital asset mining computers or replace parts on a cost-effective basis for efficient and profitable digital asset mining operations.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
MVIS Global Digital Assets Mining Index is the exclusive property of MarketVector Indexes GmbH (a wholly owned subsidiary of the Adviser), which has contracted with Solactive AG to maintain and calculate the Index. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MarketVector Indexes GmbH, Solactive AG has no obligation to point out errors in the Index to third parties. The VanEck Digital Assets Mining ETF is not sponsored, endorsed, sold or promoted by MarketVector Indexes GmbH and MarketVector Indexes GmbH makes no representation regarding the advisability of investing in the Fund.