Since the start of the year, Long Blockchain’s stock is down 43%… Riot Blockchain 38%… and Chanticleer Holdings 27%.
What do these three companies have in common?
We told you to avoid them in the January 4 Daily.
Why? Just look at the chart below. The companies are down an average of 36%.
Regular readers likely remember the backstory… Each company had incorporated “blockchain” into its name or announced a new blockchain venture.
Long Blockchain (née Long Island Iced Tea) is a beverage company. Riot Blockchain (formerly Bioptix) markets biotech diagnostic equipment. And Chanticleer Holdings owns burger joints and Hooters restaurants. (Earlier this month, Chanticleer announced a “blockchain” customer loyalty program.)
These moves were just to get the attention of investors. That’s why we called them “blockchain imposters.”
At Palm Beach Research Group, we’re known worldwide for helping our readers and subscribers make life-changing gains in the cryptocurrency space. But we don’t make those gains just by knowing what to buy… We also know what not to buy.
That’s why today I want you to be on the lookout for another type of “blockchain imposter.” They’re marketed as an easy way to gain exposure to this space. Instead, they’ll likely expose you to losses.
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A One-Click Way to Gain Broad Exposure
Exchange-traded funds (ETFs) are one of Wall Street’s most popular vehicles. Most track an index or sector of the market.
At the Daily, we like ETFs because they offer a cheap and simple way to gain exposure to a trend. For instance, you can buy every stock in the S&P 500 in a single security via the SPDR S&P 500 Trust ETF (SPY).
But you must be careful when buying ETFs… They can be deceitful. Here’s why…
The name of an ETF doesn’t always match its holdings. For instance, some “value” ETFs hold anything but.
We’re now seeing this happen in the blockchain space…
On January 17, we saw the launch of the first two blockchain-based ETFs: Reality Shares Nasdaq NextGen Economy ETF (BLCN) and Amplify Transformational Data Sharing ETF (BLOK).
As you may have guessed from the ticker symbols, both funds want you to think they’re associated with blockchain companies. But you’d be wrong…
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Devil’s in the Details
It’s not uncommon to see some ETFs with holdings that don’t belong. And that’s the case with BLCN and BLOK.
First, neither ETF holds a single cryptocurrency. Not even bitcoin. So, you don’t get any exposure to cryptocurrencies…
Instead, they hold companies that will likely benefit from blockchain adoption. Some of their biggest holdings are Intel, Microsoft, Nvidia, Intel, and Overstock.
These companies make products that enable blockchain technology to work. For instance, Microsoft runs a service that helps customers create private blockchains on the Ethereum network.
But they’re not “pure” blockchain companies. And they don’t earn most of their revenues from blockchain technology.
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It Gets Worse
Not only are these funds made up mainly of non-blockchain companies… they actually hold companies that blockchain technology will disrupt.
For example, BLCN also holds companies like Barclays, Goldman Sachs, and Mastercard. These are quality companies today… But blockchain tech poses an existential threat to banks and financial services companies.
The blockchain will make it easier and cheaper for you to make payments and transfer money than with traditional wire and financial services.
Take Mastercard for instance… The blockchain will pressure the company to lower its fees. Today, it costs merchants $2.50 to accept a $100 Mastercard purchase. But on the Ripple blockchain, that same purchase would cost only 50 cents.
Putting these companies in a blockchain ETF is like adding Sears to an ETF of online retailers. That’s absurd. You buy an online retailer ETF to avoid dying retailers like Sears.
The same is true for blockchain ETFs. You’d buy them to gain exposure to the disruptors… not the disrupted.
Truth be told, the two blockchain ETFs are hybrid technology and financial funds. We’re fans of both sectors at the Daily, but we don’t buy them to gain blockchain exposure.
Before you buy any ETF, make sure to check what types of companies the fund holds. A good place to start is the ETFdb.com database.
The blockchain will be a disruptive technology. And our PBRG team will continue finding the most profitable public companies in this space. Stay tuned…
Regards,
Nick Rokke, CFA
Analyst, The Palm Beach Daily
P.S. As I mentioned above, ETFs can be a simple way to gain broad exposure to major trends. But the best way to make life-changing gains in this space is to find specific plays that can grow 10, 50, or even 100 times as a disruptor.
Nobody in this industry has found more potential disruptors than world-renowned crypto expert Teeka Tiwari. Teeka has traveled hundreds of thousands of miles doing boots-on-the-ground research to establish a priceless Rolodex of insider contacts in the crypto space. And he’s developed a system to select the next bitcoin and ether.
Teeka’s just passed four cryptocurrencies through the system with massive profit potential… He’s included them in his special report called the “Bitcoin Millionaire Master Plan.” You can learn how to get your copy right here…
MAILBAG
Today, plenty of feedback from the Palm Beach community about Chris Wood’s essay on publicly traded blockchain companies (“How to Play the Crypto Boom on Wall Street”)…
From John W.: Yes, I think it is a great idea to be able to invest in blockchain-related stocks. Buying and selling cryptos is very difficult if you are not computer savvy… It’s not for everyone—including me.
From Linda H.: My husband and I have enjoyed gains from cryptocurrencies like we’ve never seen before in the stock market. I’m excited that you have added Chris Wood to your team because he’ll be researching and recommending blockchain-related stocks to add to our stock portfolio.
We’ve been with Palm Beach Research Group for a number of years now and can’t express enough gratitude for all that we’ve learned… and how very much we appreciate the hard work you do to make investing so much easier for us. Both our stock portfolio and crypto portfolio have benefited. Keep it coming … Love you all!
From Dave D.: Chris Wood asked if we’d like to buy blockchain companies. Firstly, let me say that we’ve done fantastically well with Teeka’s recommendations to this point. Our initial investment of $13,000 is worth $329,000 as of this morning.
In our retirement fund, we’ll continue to invest in an assortment of stocks, including the Palm Beach Letter stocks we already own… and we look forward to adding Chris’ recommendations.
And more praise for our world-class customer service team…
From Kay H.: I wanted to say thank you to your cryptocurrency specialist Hector. I think he’s the coolest! His videos on the Palm Beach Crypto Corner are the best.
Anyway, I wanted to follow up with you on my missing bitcoin. When I subscribed to Palm Beach Confidential, I was supposed to receive $200 worth of bitcoin as part of my subscription. I thought I had sent you my Coinbase address… and was looking for my free bitcoin there. Actually, I had sent you my Bittrex address… and today I found my bitcoin. Its value has doubled to a little over $400. I appreciate all the help from you and your associates. Thank you again!
IN CASE YOU MISSED IT…
Have you heard of Bill Bonner’s “Trade of the Century?”
If not, then consider signing up for his free Legends of Finance Summit. During the summit, Bill will give you all the details of this historic trade.
The summit will be held on February 8 at 8 p.m. ET. You can RSVP for your free seat right here.
