Blockchain Technology ETF – The Best Blockchain ETFs in Canada

ByMathieu Litalien Published On:

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        Key takeaways

        Volatility and Long-Term Potential – While blockchain ETFs can be volatile, they also present strong long-term growth opportunities as blockchain adoption expands.

        Blockchain Growth Exposure – These ETFs provide exposure to companies benefiting from blockchain technology and digital infrastructure.

        Canada’s Role in Crypto Investing – Canadian markets have been at the forefront of crypto-related ETFs, offering investors diversified access to blockchain innovations.

        One ETF I like way better than the ones on this list.

        The interest in Blockchain has surged as of late as Bitcoin becomes more and more relevant. Crypto is no longer an investment option for tech junkies and misfits; it has made the watchlist or even the portfolio of many mainstream investors. 

        Naturally, the two are inherently linked, but one common mistake investors make is to assume one equals the other.

        Unfortunately, it is a mistake made by many, especially those who are just learning how to buy stocks, and one that could not be further from the truth. Blockchain is not Bitcoin, and Bitcoin is not Blockchain.

        Without going into great technical detail, Blockchain is the technology that underpins the Bitcoin cryptocurrency. Blockchain powers Bitcoin, and while it was initially created for Bitcoin, they are not one and the same.

        Decentralization

        Blockchain is a decentralized database or a ledger that is distributed across many computers. Hence, it is referred to as decentralized; arguably, it is what makes Blockchain’s technology so revolutionary and why the use cases expand far beyond that of cryptocurrencies.

        Many believe that Blockchain’s decentralization will revolutionize the way companies do business. For one, it is largely considered to be safe as there is no single point of attack for which to target. Secondly, Bitcoin has made the use case for making digital transactions much easier (and secure).

        Finally, given its nature, Blockchain leads to greater transparency and increased accuracy and can ultimately lead to significant cost reductions.

        The potential use cases for Blockchain are too many to list but include things such as executing contracts, maintaining records and auditing. Today, organizations worldwide are investigating how they can utilize and adopt Blockchain technology.

        How can individual investors benefit?

        Exchange Traded Fund (ETF) investing is one of the simplest ways of gaining exposure to a broad base of assets. This is even more true in the situation of blockchain stocks. They are heavily volatile, and choosing the wrong company can lead to large scale losses. Broad diversification doesn’t eliminate this risk, but mitigates it.

        Canadian ETFs cover markets, sectors, and industries and, in some cases, get down to specific niche industries. Blockchain is one such niche industry, and in Canada, there are two solid options for investors.

        Since these ETFs trade on the Toronto Stock Exchange, buying them is as simple as buying a stock using your favourite online broker. It’s a simple way to get access to an exciting new type of asset.

        The Best Blockchain ETFs in Canada

        Actively managed blockchain-focused ETF

        Harvest’s Blockchain Technologies ETF (TSX:HBLK)

        HBLK is an actively managed ETF that invests in global companies involved in blockchain technology. This includes firms engaged in blockchain development, cryptocurrency mining, and related services. The fund aims to provide exposure to companies driving innovation in decentralized finance and enterprise blockchain solutions.

        • Active management for blockchain growth – Unlike passive ETFs, HBLK uses active management to identify top-performing blockchain-related companies. This approach aims to outperform broad tech indices by capturing emerging blockchain trends early.
        • Global exposure to blockchain leaders – The ETF includes holdings in North American, European, and Asian companies, ensuring diversified exposure to blockchain innovation. This global approach mitigates country-specific risks while capitalizing on international adoption.
        • Includes blockchain infrastructure companies – HBLK doesn’t just focus on crypto but also on firms that provide infrastructure for blockchain adoption, including data security, smart contract platforms, and enterprise blockchain solutions.
        • Capturing DeFi and Web3 growth – With decentralized finance (DeFi) and Web3 applications gaining traction, this ETF positions itself to benefit from increased institutional adoption of blockchain technology.
        • Potential for high growth but with volatility – Blockchain stocks can experience significant price swings due to regulatory uncertainty and crypto market cycles. However, long-term growth potential remains strong.
        • Institutional blockchain adoption – Large enterprises and financial institutions are investing heavily in blockchain infrastructure, increasing demand for blockchain-related services.
        • Regulatory developments in crypto – Governments worldwide are refining crypto regulations, which could impact blockchain-related stocks either positively (clearer frameworks) or negatively (stricter controls).
        • Evolution of Web3 and decentralized applications – Web3 innovations, including NFTs and metaverse applications, continue to drive blockchain demand.
        • Shift towards enterprise blockchain solutions – Companies like IBM and Microsoft are expanding their blockchain-as-a-service offerings, creating investment opportunities in the space.
        • Market cycles of Bitcoin and crypto – Since many blockchain-related stocks correlate with Bitcoin’s price movements, the ETF may experience cycles of volatility based on crypto market trends.
        • Regulatory uncertainty – Governments worldwide continue to debate crypto and blockchain regulations, which may impact the ETF’s holdings.
        • Correlation with cryptocurrency volatility – Many blockchain companies are highly sensitive to Bitcoin and Ethereum price fluctuations, leading to potential price swings.
        • Competition from traditional financial institutions – Banks and major financial institutions are developing their own blockchain-based payment solutions, potentially reducing the need for some blockchain startups.
        • Technology risks and adoption speed – While blockchain has immense potential, its mainstream adoption may take longer than expected, affecting growth projections.

        Blockchain-adjacent ETF focusing on computing power

        Global X’s Big Data and Hardware ETF (TSX:HBGD)

        HBGD provides exposure to companies that power blockchain networks through hardware infrastructure, including semiconductor firms, cloud computing providers, and data analytics companies. It captures the broader technological backbone that supports blockchain applications.

        • Focuses on blockchain infrastructure rather than crypto – This ETF offers a way to invest in the blockchain space without direct exposure to cryptocurrencies. Instead, it targets hardware and data analytics firms crucial for blockchain development.
        • Semiconductors and computing power are essential for blockchain – Companies like NVIDIA, AMD, and Intel are at the forefront of developing chips used in blockchain mining and AI-driven big data analytics. These firms benefit from both blockchain and broader tech industry growth.
        • AI and blockchain convergence – Artificial intelligence and blockchain technology are increasingly integrated, especially in fraud detection, supply chain verification, and secure digital transactions.
        • Enterprise adoption of blockchain-based data solutions – Large enterprises are leveraging blockchain for secure, tamper-proof data management, benefiting cloud computing and cybersecurity firms.
        • Diversified exposure to broader tech megatrends – In addition to blockchain, this ETF provides exposure to trends like AI, quantum computing, and big data analytics, making it less dependent on crypto market fluctuations.
        • Rising demand for computing power – Blockchain networks, AI applications, and cloud computing are all driving demand for high-performance hardware solutions.
        • Semiconductor industry innovation – Companies developing advanced chips for blockchain mining and AI are set to benefit from technological advancements and increased adoption.
        • Expansion of cloud-based blockchain services – Major tech firms like Amazon Web Services (AWS) and Google Cloud are integrating blockchain solutions into their platforms.
        • Energy efficiency concerns in blockchain – Companies working on more sustainable blockchain mining solutions and energy-efficient data centers may see increased investor interest.
        • Institutional investment in data security – As blockchain gains traction, cybersecurity firms providing blockchain-enhanced security solutions stand to benefit.
        • Dependence on semiconductor market cycles – Since a significant portion of the ETF is tied to hardware companies, any downturn in the semiconductor sector could impact returns.
        • Tech sector volatility – While not directly exposed to cryptocurrency, this ETF is still subject to overall technology sector fluctuations.
        • Slower-than-expected blockchain adoption – If blockchain solutions take longer to gain mainstream adoption, some companies in this ETF may face growth challenges.
        • Geopolitical risks in semiconductor supply chains – Many semiconductor companies rely on global supply chains, which can be affected by geopolitical tensions, trade wars, or manufacturing disruptions.

        HBLK vs HBGD

        Interestingly, both ETFs offer something different and can be held together without worry of much overlap. Harvest’s fund is likely to be less volatile, given its exposure to some of the larger and more traditional tech companies.

        Horizons appears to be the purest play of the two; however, it comes with additional risk, given the makeup of its holdings. Although greater risk comes with greater reward, should one of HIVE or RIOT falter, the fund could take a significant hit.

        As of writing, HBLK is also trading at a higher valuation. This isn’t surprising because the blockchain industry is struggling as of late, depressing the earnings of the underlying companies. (Also see how Canadian covered-call ETFs are affected by market trends).

        In such a scenario, I’d expect the fund with the higher risk profile to trade at more expensive valuations. 

        Overall, both look like solid options. Which fund an investor prefers really comes down to personal choice. HBLK has more exposure to larger tech names with a more indirect interest in the Blockchain, while HBGD has a more globally diverse portfolio.

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