The crypto-centric Amplify Data Sharing ETF (NYSEARCA:BLOK) is up nearly 70% year-to-date. It offers more diversification than many of its competitors in the crypto space, with a more all-encompassing group of holdings. BLOK has some good things going for it, but ultimately it has one cause for concern that tempers my enthusiasm about the fund quite a bit. Read on to find out more.
What is BLOK ETF’s Strategy?
BLOK is an actively-managed ETF from Amplify ETFs that looks to invest “at least 80% of its net assets in equity securities of companies actively involved in the development and utilization of blockchain technologies,” according to the fund itself. BLOK launched in 2018, so it predates many of its competitors, which launched during the height of the crypto bull market. Its ticker is a reference to the blockchain technology that underpins cryptocurrency.
BLOK’s Holdings
One thing that I like about the BLOK ETF is that it offers decent diversification, especially when compared to many of its peers within the world of crypto ETFs. BLOK holds 47 stocks, and its top 10 holdings make up just 42.1% of assets.
This compares favorably to its less-diversified competitors. Some examples include the VanEck Digital Transformation ETF (NASDAQ:DAPP), which holds just 20 stocks (DAPP’s top 10 holdings make up 62.9% of the fund), the Bitwise Crypto Industry Innovators ETF (NYSEARCA:BITQ), which holds 27 stocks (BITQ’s top 10 holdings make up 64.9% of the fund), and the Global X Blockchain ETF (NASDAQ:BKCH) which owns just 25 stocks (BKCH’s top 10 holdings make up 75.6% of the fund).
See below for an overview of BLOK’s top 10 holdings using TipRanks’ holdings tool.
BLOK’s largest position is MicroStrategy (NASDAQ:MSTR), which is a mainstay among crypto ETFs based on the fact that the enterprise software company holds a considerable amount of Bitcoin (BTC-USD) on its balance sheet and because CEO Michael Saylor is one of Bitcoin’s loudest and most visible proponents in the corporate world.
Other prominent holdings include crypto brokerage and exchange Coinbase Global (NASDAQ:COIN), and crypto miners like Marathon Digital (NASDAQ:MARA), Riot Platforms (NASDAQ:RIOT), Cleanspark (NASDAQ:CLSK), and Hut 8 Mining (NASDAQ:HUT).
While Overstock.com (NASDAQ:OSTK) might look a bit out of place to some readers, the online retailer has been an early crypto adopter and experimented heavily with blockchain technology over the years, allowing customers to pay with Bitcoin and launching its own venture fund focused on the crypto and blockchain space. At one point in time, Overstock even had its own crypto exchange, tZero, (although it shut down in March 2023).
Galaxy Digital (OTC:BRPHF) is another interesting holding, as it is a multifaceted company that mines and trades crypto, invests in cryptocurrencies and other crypto companies, and offers investment banking services to the crypto space.
These holdings maintain some pretty impressive Smart Scores, as BLOK’s seven largest holdings all have outperform-equivalent Smart Scores of 8 or above. The Smart Score is a proprietary quantitative stock scoring system created by TipRanks. It gives stocks a score from 1 to 10 based on eight market key factors. A score of 8 or above is equivalent to an Outperform rating.
BLOK has a Neutral ETF Smart Score of 7.
Is BLOK Stock a Buy, According to Analysts?
Turning to Wall Street, BLOK has a Hold consensus rating, as 66.22% of analyst ratings are Buys, 27.35% are Holds, and 6.43% are Sells. At $29.11, the average BLOK stock price target implies 11.6% upside potential.
How Has BLOK’s Performance Been?
Crypto is known for its volatility, and as such, BLOK’s performance over the years has been a bit of a mixed bag. As of the end of the quarter that ended in June, BLOK had a one-year return of 24.7%. Its three-year annualized return of 9.3% and five-year annualized return of 7.1% aren’t necessarily bad, as they are positive returns, but they trail the returns of the broader equity market by a fairly wide margin.
Since its inception in 2018, BLOK’s annualized return is 5.9%. Again, it’s not terrible, but investors would have generated much better returns by simply parking their money in an S&P 500 (SPX) fund.
High Fees
Beyond BLOK’s tepid overall performance, the main negative of the fund that warrants attention here is its high expense ratio. BLOK is actively managed, so its expenses are always going to be higher than those of an index fund. However, its expense ratio of 0.75% still seems high, especially given that its fund has not been crushing the market over the years, which would make it worth paying a premium for.
Crypto ETFs seem to have higher fees than the broader ETF landscape, but even within this already-expensive cohort, BLOK is at the higher end of the spectrum when it comes to expenses. For example, the aforementioned DAPP and BKCH ETFs each have identical expense ratios of 0.5%. Then, you have the First Trust Indxx Innovative Transaction & Process ETF (NASDAQ:LEGR), which charges 0.65%. BLOK is cheaper than BITQ, which charges a startlingly high 0.85%.
How expensive is an 0.75% expense ratio, in practice? During year one, an individual investing $10,000 into BLOK would pay $75 in fees. Over time, this amount compounds significantly — assuming the 0.75% expense ratio remains consistent and that the fund returns 5% per annum going forward, the same investor would pay $240 in fees over three years, $417 in fees over five years, and $930 in fees over the course of 10 years.
This is a steep price to pay for any ETF, especially one that is underperforming the broader market.
Conclusion
In conclusion, BLOK does have some good attributes. It offers investors a pretty broad degree of exposure to the companies within different facets of the crypto industry, and it is more diversified than many of its competitors, with a somewhat more imaginative group of holdings.
On the downside, the fund has been around for a while and it hasn’t really lit the world on fire in terms of its performance, so it’s hard to justify paying for its steep expense ratio, which will cost investors a substantial sum over the years.
