Blockchain ETFs vs. Bitcoin ETFs: What's the Difference?

Blockchain ETFs vs. Bitcoin ETFs: An Overview

Even as the cryptocurrency bitcoin has gained traction within the investment community, bitcoin exchange-traded funds (ETFs) are relatively new. Blockchain ETFs have also made their debut in mainstream markets.

In the news and mainstream media reports, the terms bitcoin and blockchain are sometimes used interchangeably. As a result, it's possible to confuse blockchain ETFs and bitcoin ETFs, although they are different financial instruments.

Key Takeaways

  • Bitcoin exchange-traded funds (ETFs) are relatively new, while the number of blockchain ETFs continues to grow.
  • Bitcoin and other virtual currencies have been embroiled in multiple regulatory battles and have been heavily scrutinized by government authorities.
  • On the other hand, blockchain technology is neither banned nor under scrutiny by most regulatory agencies.
  • Blockchain ETFs primarily track the stock market prices of companies that have invested in blockchain technology.
  • There are several ETFs that invest in bitcoin futures, but the SEC has rejected several proposals for bitcoin spot ETFs.

Blockchain ETF

Blockchain ETFs primarily track the stock market prices of companies that have invested in blockchain technology in their fund. Because blockchain is a technology, it is not tied to a specific company or product.

"Bitcoin needs blockchain but blockchain doesn’t need bitcoin,” said Christian Magoon, CEO of Amplify ETFs, the largest ETF focused on blockchain. The blockchain universe of investments is large and not restricted to a particular sector. For example, IBM formed a partnership with the shipping line Maersk to implement blockchain in the freight industry.

Similarly, e-commerce company Overstock has made investments in blockchain through its Medici Ventures and tZERO digital coin exchange. Naturally, these companies are favorites with blockchain ETFs. For example, Amplify ETFs’ Amplify Transformational Data Sharing ETF (BLOK) and Siren Shares Nasdaq NexGen Economy (BLCN) have included both companies in their ETFs. 

Most blockchain ETFs invest in the stock of technology companies, not cryptocurrencies.

Bitcoin ETF

Most bitcoin ETF applications that have been submitted to the Securities and Exchange Commission (SEC) have proposed tracking the price of bitcoin through futures contracts that are traded on the Chicago Board Options Exchange (CBOE) and through the CME Group. In this model, ETFs track the price of bitcoin through ownership of futures contracts.

In October 2021, the first-ever bitcoin futures ETF was launched—the ProShares Bitcoin Strategy ETF. It tracks bitcoin futures contracts pegged to the future price of the cryptocurrency. Since then, several other funds have launched with the goal of investing in bitcoin futures contracts.

However, there are no ETFs that invest in Bitcoin directly. The SEC has rejected every proposal for such funds, citing the possibility of "fraudulent and manipulative acts and practices." The regulator has also raised concerns about price manipulation through Tether and other stablecoins.

In their current form, blockchain ETFs are relatively stable compared to the volatility of (hypothetical) bitcoin ETFs. This is because they are not exposed to bitcoin’s price swings.

That said, blockchain is still considered a nascent technology and does not currently constitute a large market. As such, the stock prices of companies being tracked by the ETF are more susceptible to factors that do not concern or affect blockchain technology. When they are launched, bitcoin ETFs will be directly affected by the policies of regulatory agencies regarding bitcoin and cryptocurrencies.  

Although bitcoin spot ETFs have been rejected in the U.S., they can be traded in Canada and other overseas markets.

Key Differences

To understand the difference between bitcoin ETFs and blockchain ETFs, it's important to know the difference between the instruments they track. Bitcoin is a cryptocurrency, while a blockchain is the underlying database technology. That distinction becomes important when considered within the context of investment instruments. 

Even though bitcoin futures are already offered on the country’s leading exchanges, cryptocurrency’s regulatory status is still unclear in some jurisdictions. In recent years, virtual currencies have been embroiled in multiple regulatory battles, particularly for their role in criminal activities, such as money laundering.

On the other hand, blockchain technology has won the interest of several figures in the world of legacy finance, including J.P. Morgan CEO Jamie Dimon. Blockchain technology is neither banned nor under scrutiny by regulatory agencies.

There are currently eight blockchain ETFs trading in regulated markets, according to ETF Database. All of these ETFs were launched between 2018 and 2021. As of May 2022, they have a combined $1.4 billion worth of assets under management (AUM), and their expense ratios range from 0.50% to 0.95%.

How Do You Invest in Blockchain ETFs?

Blockchain ETFs are available through most securities brokerages, including Fidelity, E*Trade, and Robinhood. The easiest way to identify these funds is to search for "blockchain" in your brokerage's ETF Screener. This will return a list of funds that you can research further to determine if they meet your investment criteria.

How Do You Invest in Bitcoin ETFs?

You can invest in a bitcoin futures ETF through the same broker that you use for other ETFs. Using your broker's ETF screener, search for terms like "bitcoin" or "crypto" to identify funds related to cryptocurrencies. From there, you can narrow your search further by researching the management and investment philosophy of each fund.

When Will Bitcoin ETFs Start Trading?

Bitcoin futures ETFs are already available, but U.S. regulators are unlikely to approve a bitcoin spot ETF. This is because bitcoin futures trade on regulated commodity markets, while bitcoin spot markets are largely unregulated, raising the possibility of fraud or price manipulation. SEC Chairman Gary Gensler has indicated that these concerns would have to be resolved before a bitcoin spot ETF could be approved.

The Bottom Line

As the popularity of bitcoin continues to surge, so have the bitcoin ETFs. In general, digital currencies have become increasingly mainstream among institutional investors. There are many things that are appealing about a cryptocurrency ETF—investors would be able to buy and sell bitcoin more easily, and eliminate the inconvenience of securing and storing bitcoin. However, regulators remain concerned about the risk of exposing retail markets to a bitcoin spot ETF.

Investing in cryptocurrencies and other Initial Coin Offerings (ICOs) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. CNN Business. "Forget Bitcoin. Here Come the Blockchain ETFs."

  2. ProShares. "ProShares to Launch the First U.S. Bitcoin-Linked ETF on October 19."

  3. National Association of Securities Dealers Automated Quotations. "The First Blockchain ETF Continues to Lap Its Competitors."

  4. National Association of Securities Dealers Automated Quotations. "SEC Chairman Gary Gensler: Bitcoin Competes With the U.S. Banking System."

  5. The White House. "Executive Order on Ensuring Responsible Development of Digital Assets."

  6. Bitcoin. "Gary Gensler Explains Why SEC Approves a Bitcoin Futures ETF."

  7. IBM. "IBM Newsroom: Maersk and IBM Introduce TradeLens Blockchain Shipping Solution."

  8. Overstock. "Investor Press Release: and Medici Ventures Celebrate the Launch of tZERO Crypto Wallet Mobile App."

  9. U.S. Securities and Exchange Commission. "Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of a Proposed Rule Change, as Modified by Amendment No. 2, to List and Trade Shares of the Teucrium Bitcoin Futures Fund Under NYSE Arca Rule 8.200-E, Commentary .02 (Trust Issued Receipts)," Pages 3-5.

  10. CoinDesk. "A Spot Bitcoin ETF Still Seems Unlikely."

  11. U.S. Securities and Exchange Commission. "Order Disapproving a Proposed Rule Change to List and Trade Shares of the VanEck Bitcoin Trust under BZX Rule 14.11(e)(4)," Page 20.

  12. Financial Times. "Fidelity Set to Launch Physical Bitcoin Spot ETF."

  13. JPMorgan, Chase & Co. "Chairman & CEO Letter to Shareholders."

  14. ETF Database. "Blockchain ETF List."

  15. ETrade. "Cryptocurrency."

  16. Bloomberg. "SEC's Gensler Doubles Down on Concerns About Spot Bitcoin ETFs."

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.