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The BIG Problem with Blockchain ETFs

Market update: we are seeing some nice price movement over the past 3-5 days. Bitcoin above $8,000 is putting many minds at ease after tax day, and ETH is moving up slowly but surely at $515 as of this writing.

We have not recommended engaging positions at these prices, and instead have instructed telegram users to set limit orders about 10-15% off current prices for coins they are confident about.

“Cryptocurrency is stupid, but the technology behind it is important”

How many times have all of us heard this? I can tell you that all of our non-cryptocurrency colleagues in finance continue to ask us for pure plays on blockchain technology, and not cryptocurrency.

There is an enormous problem here. The most innovative designers and sellers of blockchain technology are private companies. They did a crowd-sale (ICO), and have no equity in the public markets that’s being traded or owned in any way.

Here is an example: Stratis. A cryptocurrency and blockchain company that has done exclusive work with Microsoft for their cloud computing product, Microsoft Azure. This is called “private-chaining”. They design what their buyer needs, and receive a fee. There is no use of their coin, STRAT. With private deals being the majority of the blockchain industry, a normal investor simply can’t wiggle their way into those transactions.

Who Cares?

There is truly no way to take an ownership stake in companies that are designing the future. We have seen only two ETFs, BLOK & BLCN, become the pioneers of merging our world with the traditional financial world. The ETFs are supposed to expose the investor to the technology, and the transactions that we wish we could benefit from as coin holders.

This is not what is taking place based on the constituents they have. These ETFs are forced to basket the only thing they have access to: customers.

Top 5 Holdings of BLOK & BLCN

BLOK

1. Taiwan Semi Conductor – cryptocurrency mining play. A popular holding in many Emerging Markets Mutual Funds.

2. Digital Garage- Japanese company funded by Google to find technology to be implemented in the country. Not focused solely on blockchain

3. GMO Internet- cryptocurrency mining

4. Square- payment processor who would be using cryptocurrency payment options to serve customers & running an crypto exchange

5. Nvidia- mining hardware manufacturer

BLCN

1. Intel- blockchain customer (ledger hardware)

2. IBM- blockchain customer (stellar lumens)

3. Microsoft- blockchain customer (Stratis)

4. SAP- **Cryptographic Library Producer**

5. SBI- Japanese bank launching a purchased cryptocurrency exchange

Conclusion

Look at those names! There is nothing in-house with most of the companies above to develop their own blockchains or cryptocurrency businesses. Do you want mining exposure? That can be done in a much more direct way on the TSX with Hut 8.

SAP would be the only name that we feel is truly deserving of a “blockchain company” title. Their cryptographic library is an entrance to a new business, and their goals are to compete with the cryptocurrency blockchain companies that have received the lucrative projects like Microsoft and IBM.

Overall, blockchain technology can’t be invested in properly right now. You can buy companies who are customers, but we want sellers. The true sellers have chosen a different method of funding, and therefore can’t be invested in directly. It is something truly frustrating for all of us, and a solution will hopefully come in due time.

Until then, especially in a volatile market, holding large value technology names under a blockchain banner doesn’t make too much sense.

Follow us on Twitter @cryptoleaks4all and cryptoleak.io on Telegram for more details.

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