Amplify Transformational Data Sharing ETF (BLOK) - A Risky Investment Strategy with Volatility

The Amplify Transformational Data Sharing ETF (BLOK) is an investment strategy that focuses on companies involved in blockchain technology, including leading innovators and infrastructure companies, as well as digital assets. While it may be an optimal blockchain strategy, its volatility may be too risky for some investors.

The Amplify Transformational Data Sharing ETF (BLOK) is an exchange-traded fund that focuses on companies involved in blockchain technology, including leading innovators and infrastructure companies, as well as digital assets. Launched on January 16, 2018, BLOK is an actively managed portfolio issued by Amplify Investments. The fund is listed on the NYSEARCA and has a ticker symbol of BLOK. It primarily invests in global equities, with a significant portion of its portfolio dedicated to cryptocurrency-related assets.

BLOK has shown impressive performance, with a total return of 70.56% in the past year, including dividends. Over its lifetime, the fund has averaged an annual return of 19.60%. However, the fund's high exposure to cryptocurrency-related assets, with 43% of its portfolio tied to such assets, makes it a high-risk investment. This exposure can lead to significant volatility, which may be too risky for some investors [1].

The fund's top holdings include Coinbase Global, Inc. (COIN) and Robinhood Markets, Inc. (HOOD), both of which are heavily involved in cryptocurrency trading and other financial services. Coinbase, in particular, is a unique financial services provider that offers asset-backed lending for bitcoin-related organizations. MicroStrategy Incorporated (MSTR), now known as Strategy, is also a major component of BLOK. Strategy acts as a leveraged bitcoin strategy, issuing debt and equity to raise capital for additional bitcoin investments. This strategy allows investors to indirectly invest in bitcoin without directly purchasing the cryptocurrency [2].

BLOK also invests in blockchain ETPs, providing direct exposure to the price changes of Bitcoin. This can provide a certain degree of stability, as many of the holdings in the portfolio depend on the price of bitcoin to operate. However, the fund's high concentration on the bitcoin ecosystem poses a significant risk. During periods of major bitcoin declines, BLOK may experience substantial losses in its portfolio strategy [2].

The fund commands a relatively high fee of 73 basis points (bps) compared to peer portfolios, which typically range between 51-68 bps. Despite this, BLOK has outperformed many of its peers in recent months, particularly following the strong performance of Bitcoin. The fund's liquidity is a major asset, with $1.11 billion in assets under management and an average of 312,000 shares trading hands daily, valued at $18.25 million. BLOK also pays out an annual distribution, with the most recent payout rate being $2.59 per share, yielding 4.43% [2].

Investors should consider the historical payout rate, as distributions can significantly vary from year-to-year due to the performance of assets. Given this variability, BLOK is not recommended as an income ETF. Instead, it is more appealing as a trading vehicle due to its liquidity and active management strategy [2].

In conclusion, the Amplify Transformational Data Sharing ETF (BLOK) offers investors a way to gain exposure to the blockchain industry and cryptocurrencies. However, its high volatility and concentration on the bitcoin ecosystem make it a high-risk investment. Investors should carefully consider their risk tolerance and investment goals before adding BLOK to their portfolios.

References:
[1] https://stockanalysis.com/etf/blok/
[2] https://seekingalpha.com/article/4801130-blok-maybe-the-optimal-blockchain-strategy-but-volatility-may-be-too-risky-for-many