The BLOK-Chain Monthly - Amplify ETFs
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
AMPLIFY TRANSFORMATIONAL
DATA SHARING ETF
The BLOK-Chain Monthly
September 2021
Staying up-to-date with the rapidly evolving
blockchain and crypto ecosystem
By Dan Weiskopf and Mike Venuto
Co-Portfolio Managers of the Amplify Transformational Data
Sharing ETF (BLOK)
Amplify
ETFs
THE MANDATE TOP 10 HOLDINGS As Of 8/31/2021
Ticker Company % Weight
The Amplify Transformational Data Sharing ETF (BLOK) is
the first actively managed fund seeking to identify the leading MSTR MICROSTRATEGY INC 6.08%
companies focused on the transformation and development HUT CN HUT 8 MNG CORP NEW COM 5.41%
of the blockchain and cryptocurrency markets. The managers MARA MARATHON DIGITAL HOLDINGS INC 4.93%
focus on how companies can capture the growth, innovation, and
SQ SQUARE INC 4.70%
disruption of the blockchain paradigm shift. The evolution of the
internet changed how people communicate. We believe growth PYPL PAYPAL HLDGS INC 4.56%
companies that embrace the blockchain evolution will capture HIVE CN HIVE BLOCKCHAIN TECHNOLOGIES 3.89%
secular growth trends that are accelerating and disrupt core
NVDA NVIDIA CORPORATION 3.81%
processes in business. According to MarketsandMarkets, the size
BITF CN BITFARMS LTD/CANADA 3.65%
of the blockchain market is expected to grow from $3 billion in
2020 to $39.7 billion by 2025 – a compound annual growth rate COIN COINBASE GLOBAL INC 3.63%
(CAGR) of 67.3%. ARB LN ARGO BLOCKCHAIN PL 3.52%
Holdings and allocations are subject to change at any time and should not be
considered a recommendation to buy or sell any security.
AUGUST MONTHLY HIGHLIGHTS
The Fund’s positive performance in the month of August was supported by anticipated strong execution by many of the crypto
mining companies. Specifically, the category contributed 63.1% of the performance during the month with companies like
Hut8 Mining, Marathon Digital, Bitfarms Ltd, and Hive Blockchain each providing monthly returns of 62.61%, 46.91%, 42.51 and
21.58%, respectively. The category represented a 24.8% allocation in BLOK as of July 31, 2021, and steadily increased to 29.4% as of
August 31, 2021 (comprised of 9 companies). During the month, we added Power & Digital Infrastructure Acquisition Corp (XPDI) to
the portfolio and trimmed Cleanspark (CLSK). We believe a well-diversified tactically managed portfolio of these companies is the best
approach for a variety of reasons:
• The business is capital intensive, and therefore most of the companies are continuously in the market raising money to buy more
machines, which can potentially generate significant return on invested capital.
• Long term, we believe these are moat-like businesses as scale arguably leads to a cost and probability advantage, but the many
different approaches to the mining industry will almost certainly lead to much variability and outcomes. Specifically, there are
questions about:
» which type of crypto to mine and which crypto to hold (or “HODL”)
» as large-scale data centers, the question for many operators is whether to broadly host capital allocators, to just mine for
your own account, or both.
» how to manage the timing of crypto mining machine purchases.
• There are risks and benefits to geography concentration by country and by state, which includes regulation, economic incentives,
and types of power availability.
The BLOK-Chain Monthly • September 2021 p2BITCOIN ETF HOLDINGS
The portfolio also swapped from the Grayscale Bitcoin Trust (GBTC) to a basket of equally-weighted Canadian ETFs: 3iQ Coinshares
(BTCQ), Purpose Investments (BTCC) and Evolve Bitcoin (EBIT). While this is a reversal from our recent increase in GBTC, there
were regulatory changes that allowed us to make this change, which reduces the cost of ownership and tracking error. We remain
optimistic that the approval of a Bitcoin futures-based ETP is on the horizon, but what that means for the tracking error is unclear. Most
importantly, owning exposures using similar ETPs simply models to our philosophy that diversification seeks to lower risk.
Trading activity on cryptocurrency exchanges rebounded in August over July, but has a long way to go to reach May highs. According
to The Block, spot Bitcoin cryptocurrency exchange volume increased sequentially in August to $1.28 trillion from $816.53 billion in
July, and is also an increase from $197.53 billion last August 2020.¹
Cryptocurrency Exchange Volume (The Block Legitimate Index)
Source: Cryptocompare,
September 7, 2021
The Fund’s exposure to crypto trading platforms and infrastructure companies is about 30.1% as of 8/31/21, which is slightly lower than
32.58% as of 7/31/21. The decline came mostly as a result of outperformance from the miners. Sizing portfolio positions in a structural
and systematic manner is something that we constantly review. We want to manage business execution risk through diversification
as much as possible. However, noteworthy is the fact that the Fund’s top 20 positions represent about 72.26% of the portfolio assets
and its top 10 positions represent 44.18%.
THE CRYSTAL BALL AND MANAGING RISK
With volatility coming back in September, we expect trading volumes to build on current momentum in the platform/infrastructure
space. To that point, we slightly increased our position in Voyager Digital (VOYG) during the month. Voyager may seem like an underdog
versus Coinbase Global, in which we have at a similar weighting in the portfolio. We are optimistic about this segment because its
business is designed to capture trading activity and volatility that we expect will be characterized by different types of flows into the
asset class. In our conversations with company CEOs, it is apparent that the opportunity in this area involves many different business
models, regulations, and client needs. Yet, from these conversations it is also clear the infrastructure needs of institutions who just
want to own Bitcoin for safekeeping is very different from hedge fund spread trading, small business processing, and very different
across geographies.
SUMMARY
August results reflect positive momentum in the asset class. We highlighted the mining segment, and the infrastructure platform
segments of the portfolio. These are complicated growth businesses built for scale and profitability, and a diversified approach offers
the opportunity to capture the inevitable disruption that is taking place.
¹ TheBlockCrypto.com – Cryptocurrency Exchange Volume, Monthly
The BLOK-Chain Monthly • September 2021 p3APPENDIX: Monthly Detailed Performance Contribution Chart As Of 8/31/2021
% Average Weight Total Return (%) Contribution to Return (%)
AMPLIFY TRANSFORMATIONAL DATA SHARING ETF 100.00 10.80 10.80
Information Technology 66.33 14.89 9.66
MICROSTRATEGY INC-CL A 6.50 10.91 0.72
SQUARE INC - A 4.97 8.42 0.45
PAYPAL HOLDINGS INC 4.53 4.77 0.22
HUT 8 MINING CORP 4.49 62.61 2.25
MARATHON DIGITAL HOLDINGS IN 4.25 46.91 1.72
HIVE BLOCKCHAIN TECHNOLOGIES 3.68 21.58 0.75
BITFARMS LTD/CANADA 3.66 42.51 1.19
NVIDIA CORP 3.64 14.82 0.55
RIOT BLOCKCHAIN INC 3.34 13.26 0.42
VOYAGER DIGITAL LTD 3.25 9.30 0.32
ARGO BLOCKCHAIN PLC 3.18 4.01 0.13
DIGITAL GARAGE INC 2.81 10.96 0.33
GMO INTERNET INC 2.79 -0.52 -0.01
INTL BUSINESS MACHINES CORP 1.99 0.72 0.01
NORTHERN DATA AG 1.95 1.35 -0.01
ORACLE CORP 1.85 2.28 0.04
CANAAN INC 1.79 36.63 0.56
ACCENTURE PLC-CL A 1.78 5.94 0.11
CLEANSPARK INC 1.72 2.22 -0.14
ADVANCED MICRO DEVICES 1.21 4.27 0.06
EBANG INTERNATIONAL HLDGS-A 1.03 15.84 0.16
TAIWAN SEMICONDUCTOR-SP ADR 0.91 2.03 0.02
BIGG DIGITAL ASSETS INC 0.57 -25.59 -0.17
SAMSUNG ELECTRONICS CO LTD 0.46 -3.08 -0.01
Financials 19.91 2.69 0.54
STIT GOVT & AGENCY-INST 1.95 0.00 0.00
GRAYSCALE BITCOIN TRUST BTC 1.58 7.93 0.19
VPC IMPACT ACQUISITION HLD-A 0.98 1.52 0.02
MUDRICK CAPITAL ACQUISITIO-A 0.94 -8.46 -0.09
NOCTURNE ACQUISITION CORP 0.33 -0.58 0.00
BITCOIN ETF - USD 0.31 1.40 0.01
PURPOSE BITCOIN ETF 0.31 1.36 0.01
3IQ COINSHARES BITCOIN ETF 0.27 4.26 0.04
POWER & DIGITAL INFRAST-CL A 0.09 -1.36 0.00
US DOLLAR 0.01 0.00 0.00
Communication Services 3.51 12.51 0.44
COINBASE GLOBAL INC -CLASS A 3.71 9.48 0.35
GALAXY DIGITAL HOLDINGS LTD 3.53 -0.32 0.02
The BLOK-Chain Monthly • September 2021 p4APPENDIX: Monthly Detailed Performance Contribution Chart As Of 8/31/2021
% Average Weight Total Return (%) Contribution to Return (%)
SILVERGATE CAPITAL CORP-CL A 3.34 9.90 0.32
SBI HOLDINGS INC 3.29 2.07 0.06
CME GROUP INC 1.79 -4.91 -0.10
MOGO INC 1.74 -8.12 -0.16
WISDOMTREE INVESTMENTS INC 0.89 2.57 0.02
DIGINEX LTD 0.83 -2.26 -0.02
VONTOBEL HOLDING AG-REG 0.78 6.15 0.05
Not Classified 6.80 2.92 0.18
Z HOLDINGS CORP 1.88 31.10 0.54
SOFTBANK GROUP CORP 0.66 -9.66 -0.07
BAIDU INC - SPON ADR 0.51 -4.26 -0.02
TENCENT HOLDINGS LTD 0.47 0.38 0.00
Consumer Discretionary 3.44 -0.41 -0.03
OVERSTOCK.COM INC 2.32 3.60 0.07
ALIBABA GROUP HOLDING-SP ADR 0.60 -14.45 -0.08
RAKUTEN GROUP INC 0.53 -4.31 -0.02
Holdings and allocations are subject to change at any time and should not be considered a recommendation to buy or sell any security.
BLOK PERFORMANCE Quarter End as of June 30, 2021
Cumulative (%) Annualized (%)
1 Mo. 3 Mo. 6 Mo. YTD Since Inception 1 Yr. 3 Yr. Since Inception
Fund NAV 4.10% -14.54% 36.81% 36.81% 150.58% 139.62% 37.20% 30.49%
Closing Price 4.04% -14.63% 36.28% 36.28% 150.93% 140.66% 37.32% 30.54%
Fund inception date: (1/17/2018). The performance data quoted represents past performance. Past performance does not guarantee future results.
Recent short-term performance is attributable to unusually favorable conditions that are likely not sustainable, and such conditions might not continue to exist.
The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original
cost and current performance may be lower or higher than the performance quoted. Short-term performance, in particular, is not a good indication of the fund’s future
performance, and an investment should not be made based solely on returns. For performance data current to the most recent month-end please call 855-267-3837 or visit
BLOKETF.com. Brokerage commissions will reduce returns. BLOK’s gross expense ratio is 0.71%.
The BLOK-Chain Monthly • September 2021 p5Carefully consider the Fund’s invest- never develop optimized transactional process- ly offered investment vehicle in its portfolio may
es that lead to realized economic returns for any cause the Fund to trade at a premium or discount
ment objectives, risk factors, charges,
company in which the Fund invests. to NAV. Many significant aspects of the U.S. fed-
and expenses before investing. This and eral income tax treatment of investments in cryp-
additional information can be found in The Fund invests at least 80% of the Fund’s net tocurrencies are uncertain and such investments,
Amplify Funds statutory and summary assets in equity securities of companies actively even indirectly, may produce non-qualifying in-
involved in the development and utilization of come for purposes of the favorable U.S. federal
prospectus, which may be obtained above blockchain technologies. Such investments may income tax treatment generally accorded to reg-
or by calling 855-267-3837, or by visiting be subject to the following risks: the technolo- ulated investment companies.
AmplifyETFs.com. Read the prospectus gy is new and many of its uses may be untested;
carefully before investing. theft, loss or destruction; competing platforms Amplify Investments LLC is the Investment Ad-
and technologies; cybersecurity incidents; de- viser to the Fund, and Toroso Investments, LLC
Click HERE for BLOK’s top 10 holdings. velopmental risk; lack of liquid markets; possible serves as the Investment Sub-Adviser.
manipulation of blockchain-based assets; lack of
Click HERE for BLOK’s prospectus. regulation; third party product defects or vulner- Amplify ETFs are distributed by Foreside Fund
abilities; reliance on the Internet; and line of busi- Services, LLC.
Investing involves risk, including the possible loss of ness risk. The investable universe may include
principal. Shares of any ETF are bought and sold at companies that partner with or invest in other
market price (not NAV), may trade at a discount or companies that are engaged in transformation-
premium to NAV and are not individually redeemed al data sharing or companies that participate in
from the Fund. The Fund’s return may not match or
achieve a high degree of correlation with the return
of the underlying Index.
blockchain industry consortiums. The Fund will
invest in the securities of foreign companies. Se-
curities issued by foreign companies present risks
Amplify ETFs
beyond those of securities of U.S. issuers.
The Fund is subject to management risk because QUESTIONS?
it is actively managed. Narrowly focused invest- The Fund may have exposure to cryptocurren-
ments typically exhibit higher volatility. A port- cies such as bitcoin indirectly through investment Visit AmplifyETFs.com/BLOK
folio concentrated in a single industry, such as funds, including through an investment in the
companies actively engaged in blockchain tech- Bitcoin Investment Trust (“GBTC”), a privately of- Phone 855-267-3837
nology, makes it vulnerable to factors affecting fered, open-end investment vehicle. Even when
the companies. The Fund may face more risks held indirectly, investment vehicles like GBTC Email info@AmplifyETFs.com
than if it were diversified broadly over numerous may be affected by the high volatility associated
industries or sectors. Blockchain technology may with cryptocurrency exposure. Holding a private-You can also read
