How High Can the Global X Blockchain ETF Go?

The volatile blockchain sector is seeing gains in 2024, following the landmark regulatory approval of spot bitcoin ETFs. After a temporary plummet, bitcoin is soaring and the Global X Blockchain ETF is benefitting from top holding CleanSpark’s stellar growth this year.

• The BKCH fund jumped 17.6% across last week.
• Top holding CleanSpark’s stock has surged 79% since SEC approval.
• Blockchain sector tipped to reach $94bn market value by 2027.

The Global X Blockchain ETF [BKCH] surged 17.6% last week, continuing a rally bolstered by last month’s regulatory approval of spot bitcoin ETFs.

CoinShares data showed inflows of $1.1bn into digital asset investments for the week ending 9 February, with a total $2.8bn since the ETFs launched on 11 January.

Bitcoin’s value has increased since the launch, barring an initial slump. On 12 February, the world’s leading cryptocurrency exceeded the $50,000 mark for the first time in over two years.

The BKCH fund is also benefitting from a spike in the share price of its top holding, US bitcoin miner CleanSpark [CLSK]. The stock rallied 28% across last week as it reacted to bitcoin’s rising value. It has surged 428.4% over the past 12 months.

The US Securities and Exchange Commission’s (SEC) watershed ruling authorised the launch of 11 spot bitcoin funds, including those from BlackRock and Fidelity Investments. Providing exposure to bitcoin without the need to actually hold it, they have been seen as a boost to the wider sector.

The BKCH fund holds 25 companies involved in the blockchain space. It has soared 138.8% over the last year.

CleanSpark Earnings Beat Estimates

CleanSpark is the biggest holding in the BKCH fund as of 16 February, with a 17.9% weighting.

The Nevada-based bitcoin miner released positive Q1 results on 9 February. Earnings of $25.9m, or $0.14 per share, were up from losses of $29m, or $0.46 per share, in the year-ago quarter. The company posted revenues of $73.8m, a rise of 165% from $27.8m the previous year.

CEO Zach Bradford said in a statement that CleanSpark “beat all consensus estimates across the board, including revenue, EPS and profitability”.

Last month, Bradford announced plans to launch an in-house trading desk in 2024. “We really think that doing it ourselves is the best way especially with the large bitcoin balance we have,” he said in an interview with Bloomberg.

The fund’s second-largest holding is crypto miner Marathon Digital [MARA] with a 16.8% weighting. The company posted its Q3 2023 earnings in November, reporting revenues of $97.8m for the three months ended 30 September, up from $12.7m in the year-ago quarter. It attributed growth to a 467% increase in bitcoin production and 32% rise in average bitcoin prices over the year.

MARA stock gained 12.8% last week, and is up 249.9% over the past year.

Blockchain Technology Poised to Expand

The approval of spot bitcoin funds may turn out to be a major turning point for the blockchain sector, and benefit funds like the Global X Blockchain ETF.

Blockchain technology is also tipped to become increasingly widespread. According to a March 2023 report from MarketsandMarkets, the global blockchain market is projected to grow in value from $7.4bn in 2022 to reach $94bn by 2027. The report said the technology’s increasing adoption in areas including payment, digital identities and contracts will drive market growth.

Last November, Cathie Wood, CEO and Chief Investment Officer of ARK Invest, said she believed bitcoin could eventually go as high as $1.5m per coin. “We need real legislation if this truly is a new asset class, so that’s really what the question is here,” Wood told the Wall Street Journal.

At TipRanks, four analysts giving 12-month price targets for CleanSpark stock have an average of $11.25, a 37% drop from its last closing price. The consensus rating on the stock is a ‘strong buy’.

Five analysts giving 12-month price targets for Marathon Digital stock have an average price target of $21.67, which would be down 19.6% from its last close, with a consensus rating of ‘hold’.