Blockchain is finding its way into a variety of uses, and its proponents believe it could
fundamentally change the way the world does business.
Anything having to do with blockchain and/or cryptocurrencies have been prone to investor excitement of late—witness the crazy moves such as the near tripling in the share price of Long Island Iced Tea Corp. after it became Long Blockchain Corp, or the 245 percent jump in the price of Eastman Kodak Co. after it said it was working on a blockchain-based service to pay photographers for their pictures.
Magoon posits that such irrational exuberance is one reason why the SEC asked both his company and Reality Shares to nix the word “blockchain” in their respective fund names.
“I think they were concerned about funds putting blockchain in their name and then people responding by buying it blindly,” he says, adding that another factor behind the SEC’s decision pertained to the marketing perception regarding companies placed in a blockchain-focused ETF.
“When you look at what makes a blockchain company, there aren’t many that are a pure blockchain company,” Magoon says. “If a company [in the portfolio] is a bank today or a broad-based technology company, how can we push it out to investors that it’s a blockchain company? The SEC is trying to protect investors.”
The formerly named Reality Shares Nasdaq Blockchain Economy ETF will be rolled out on Wednesday as the Reality Shares Nasdaq NexGen Economy ETF (BLCN).
Active Approach
Magoon acknowledges that blockchain is a volatile space, but doesn’t anticipate the BLOK fund will mirror that volatility on an absolute basis because a number of holdings are companies a lot of people own and don’t think of as blockchain companies. That includes banks that are investing in the space as a hedge because they’re concerned that blockchain might eliminate them as a middle man for different types of transactions.
“There will be some large-cap names mingled with smaller-cap companies more focused on blockchain or cryptocurrencies or bitcoin mining or providing equipment for bitcoin mining,” he says. “The point is we don’t really know who the winners will be in blockchain, that’s why we feel the need for an active approach.
“I don’t think you can be a lagging buyer or seller [i.e., an index-based approach] in blockchain because this is such a dynamic space,” Magoon adds.