How To Add Blockchain Exposure To Your Stock Portfolio

Blockchain technology has morphed from a popular fintech buzzword into a technology that has become applicable to solve real world challenges. However, at this point in time, the majority of blockchain solutions are still in proof-of-concept stage due to the fact that the technology itself is still in its infancy. For that reason, it may be wise to start adding blockchain exposure to your stock portfolio now, so that you can get in early and benefit from the technologies growth in the years to come.

A few years ago, the only way to invest in blockchain technology was to buy bitcoin or other cryptocurrencies. Today, investors also have the options to purchase shares in companies that are involved in the development of blockchain technology-based products and services.

Investors now have access to a range of different types of listed blockchain companies, ranging from stocks of blockchain startups with market capitalizations of less than $10 million to established multinational tech giants who are betting heavily on this new technology.

Startup Stocks Versus Blue Chip Stocks

The available blockchain stocks can be clearly split into two categories: startup companies, which are largely composed of nanocap stocks, and established blue chip tech conglomerates that are developing blockchain solutions.

Blockchain Startup Stocks

In the last few years, several blockchain companies decided to go public to receive equity funding. Several of these companies include DigitalX in Australia, BTL Group in Canada, Coinsilium Group in the UK, and BTCS and Global Arena Holdings in the US.

Australian blockchain startup DigitalX Ltd (ASX:DCC) develops blockchain-based products and services to disrupt the payments industry. Its most notable solution is called AirPocket, which allows individuals to send and receive low-cost international remittances to 14 different countries. DigitalX is listed on the Australian Stock Exchange and has a market capitalization of AUD$ 10 million ($7.8 million).

Vancouver-based BTL Group Ltd. is listed on the Toronto Stock Exchange. BTL Group (TSXV:BTL) produces blockchain and smart contracts solutions for a range of industries and has developed an enterprise blockchain solution called Interbid. Interbid has recently been trialed by leading energy companies BP, Eni Trading & Shipping, and Wien Energie and is now ready to enter its go-to production phase. BTL Group has a market capitalization of C$85 million ($67 million) and has offices in both Canada and the United Kingdom.

UK-based Consilium (NEX:COIN) is a blockchain investment company that finances and manages early-stage blockchain startups through its accelerator. Coinsilium’s shares are traded on London’s NEX exchange and the company has a market capitalization of around £3.5 million ($4.5 million).

If you are a US-based investor and you are not put off by investing in penny stocks, you could also add shares of BTCS Inc. (OTCMKTS:BTCS) to your portfolio. BTCS was the first publicly traded US-based blockchain company and focuses on the development of blockchain and cryptocurrency-based solutions. Alternatively, you could also look at New York-based holding and development company Global Arena Holding Inc (OTCMKTS:GAHC), which acquires technologies, patents and companies that use blockchain technology.

 Blockchain Blue Chip Stocks

If you prefer your equity holdings to be composed of blue chip stocks or are required to as a fund manager, you will be pleased to know that there are several well-known technology companies you can invest in to add blockchain exposure to your portfolio.

IBM is betting heavily on blockchain technology, which can be witnessed by the launch of its own blockchain service in 2016. IBM’s blockchain platform is a version of the Linux Foundation’s open-source Hyperledger Project, of which it was a founding member. Since launching its Blockchain-as-a-Service (BaaS) platform, IBM (NYSE:IBM) has collaborated with corporations and startups from industries ranging from supply chain management and financial services to healthcare and food safety in an attempt to become the go-to blockchain solutions provider for big business.

Similar to IBM, Microsoft is also a firm believer in the potential that the distributed ledger technology holds to create disruptive business solutions. Microsoft (NASDAQ:MSFT) has thus developed its own blockchain-as-a-service platform, which it hosts on its cloud computing platform Azure. Microsoft’s BaaS platform provides enterprises with a solution that allows them to develop, test, and run distributed ledger business solutions backed up by Microsoft Azure.

You could also diversify away from “pure” tech stocks by adding shares of the online retailer Overstock to your portfolio. Overstock’s core business is its e-commerce platform but the company also has a strong affinity with blockchain technology. Not only was Overstock (NASDAQ:OSTK) one of the first online merchants to accept bitcoin as a payment method in 2014, but the Nasdaq-listed company also actively invests in blockchain companies through its blockchain business arm Medici Ventures.

Should you Invest in Blockchain Technology Stocks?

Blockchain technology can be applied to provide solutions for a broad spectrum of industries including increasing operational efficiency and reducing costs to digitizing paper-based processes and increasing data security.

Many are predicting that the blockchain will be an as impactful technology as the Internet was when it hit the mainstream in the 1990s. For that reason, now is probably the best possible time to look at the investment options surrounding this new technology.

While investing in digital tokens whose values are linked to the success of a specific blockchain project, such as Ethereum, is very risky and takes a certain level of technological understanding, investing in stocks that provide you with exposure to blockchain technology might be the easier yet equally profitable investment option. Moreover, given the rising demand for blockchain business solutions, it would not be surprising to see the share prices of the listed companies that are involved in blockchain technology outperforming their peers in the years to come.

While publicly traded blockchain startups are largely limited to illiquid nano cap stocks, the shares of technology giants IBM and Microsoft may be worth a closer look if you want to add blockchain exposure to your equity portfolio. They provide investors with direct exposure to the increase in demand for blockchain tech while still ticking all the blue chip stock boxes that equity investors cherish.

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About the author

John DeCleene

Whilst having spent a lot of his life in Asia, John DeCleene has lived and studied all over the world - including spells in Hong Kong, Mexico, The U.S. and China. He graduated with a BA in Political Science from Tulane University in 2016. Fluent in English and proficient in Mandarin and Spanish, he can communicate and connect with most of the world’s population too, and this certainly helped John as he gained work experience interning for the U.S.-Taiwan Business counsel in Washington D.C. as an investment analyst and then working alongside U.S. Senator Robert P. Casey of Pennsylvania as a legislative intern. He subsequently worked as a business analyst for a mutual fund in Singapore, where his passion for travel and aptitude for creating connections between opportunities and ideas was the perfect intersection of natural ability and experience, spending his time travelling between Cambodia, Hong Kong, and China investigating and discovering untapped investment opportunities. John is a fund manager for OCIM’s fintech fund, and currently progressing towards becoming a CFA charter holder. He loves to travel for business and pleasure, having visited 38 countries (including North Korea); he represents the new breed of global citizen for the 21st century.