With the first actively managed ETF within the crypto space, Amplify ETFs continues to hone the performance of their flagship crypto fund to maximize returns for investors. As active investors, they take the unique approach of revealing changes made to the fund in previous months and the logic behind any changes that were made.
In the August newsletter, Amplify ETFs broke down the performance of a core part of the fund: its investment in crypto mining companies. This category alone contributed 63.1% of the fund’s performance for the month of August in what was anticipated to be a strong month for crypto mining; at the end of July, the fund had a 24.8% allocation to crypto mining, and by the end of August, it had a 29.4% allocation.
This includes investments in Hut8 Mining with a 62.61% return, Marathon Digital with a 46.91% return, Bitfarms Ltd. with a 42.51% return, and Hive Blockchain with a 21.58% return during August. The fund also added Power and Digital Infrastructure Acquisition Corp (XPDI) to its portfolio and removed Cleanspark (CLSK) to add more diversification.
Amplify ETFs believes that diversification is vital within the crypto mining category because it is very capital intensive, with most of the companies constantly in the market to raise money for more mining rigs and machinery. This in turn enhances their return-on-investment potential as more rigs equates to more mining.
The firm also recognizes the importance of geography and carefully weighs the benefits and risks to concentration in various countries and states, analyzing any existing regulations, types of power available, and any economic incentives that exist.
Crypto mining businesses have to weigh a variety of factors; this includes what cryptocurrency to mine and what to hold (HODL) of that crypto, managing optimal timing for buying more rigs, if they are a large data center, and whether they host capital allocators or mine for their own accounts, or both.
As there is still much that is unknown about how the crypto space will continue to evolve, Amplify ETFs approaches crypto mining endeavors as moat-like businesses whose growth comes with probability and cost advantages, but with so many varieties of mining and cryptocurrency available, the potential for variability and different outcomes is large.
BLOK Invests in Miners
The Amplify Transformational Data Sharing ETF (BLOK) has over $1 billion in AUM, is the largest of the blockchain ETFs, is actively managed, and invests in companies directly involved in developing and using blockchain technology through digital and in-person research methods.
The fund also invests in companies partnered with or directly investing in companies utilizing and developing blockchain technologies. However, the fund does not invest directly in blockchain technology and cryptocurrencies.
The BLOK ETF spreads its holdings across the size spectrum. As of the end of June, the sector allocation was 32.0% into transactional, 24% into crypto miners, and 11% into venture.
Top holdings include crypto mining companies Hut 8 Mining Corp at 6.32%, Marathon Digital at 4.43%, and Hive Blockchain at 3.70%.
BLOK has an expense ratio of 0.71% and currently has 45 holdings.
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