How High Can the iShares Blockchain and Tech ETF Go?

The iShares Blockchain and Tech ETF benefitted last week as top holdings Coinbase and Riot Platforms continued to rally, with a growing number of predictions of a bull run for bitcoin in 2024.

• iShares Blockchain and Tech ETF jumped 15.7% last week.
• Top holding Coinbase is up 12% in the same period.
• Analysts calling a bull run for bitcoin in 2024, with the price topping 2021 records.

The iShares Blockchain and Tech ETF [IBLC] has surged 15.7% across the week to the close on 1 December.

Driving its performance has been top holding Coinbase’s [COIN] 11.7% rally during the same period. The second-largest holding, bitcoin miner Riot Platforms [RIOT], rose 16.5% over the week.

IBLC’s growth is part of a 21.9% upswing over the past three months, while it has soared 127% in the year to date. The fund is benefitting from the revival of crypto in 2023. Bitcoin, the world’s leading cryptocurrency by market cap, began December at an almost 19-month high and has spiked 141.6% year-to-date.

The crypto market could be reacting to predictions that the US Securities and Exchange Commission (SEC) will soon be approving spot bitcoin ETFs — a development that could trigger an explosion in investments worth billions of dollars, Michael Novogratz, Founder and CEO of Galaxy Digital [BRPHF], told Bloomberg on Monday.

The IBLC ETF gives exposure to 36 companies “involved in the development, innovation, and utilisation of blockchain and crypto technologies”. In terms of sector, 69.8% of the fund is weighted towards information technology and 28.5% to financials.

Coinbase on Track for Profit?

The top holding in the iShares Blockchain and Tech ETF portfolio as of 1 December is leading crypto platform Coinbase, with a 17.1% weighting.

Coinbase’s share price could also be reacting to bitcoin’s surge. “Higher crypto prices should lead to a boost in transaction volume and transaction revenues for Coinbase as we enter 2024,” CFRA Research Analyst Michael Elliott told Reuters in early December.

However, Elliot warned COIN could remain volatile due to uncertainty around legal challenges and regulations. Earlier this year, Coinbase was sued by the SEC, which claimed it was acting against the law by “operating as an unregistered securities exchange”.

Coinbase reported third-quarter (Q4) earnings on 2 November, when it posted net revenue of $623m, a 6% decline from the prior quarter, but up 8.2% year-over-year. Net loss for the quarter was $2m, but in a statement the company said it was “on track to deliver meaningful positive adjusted EBITDA for 2023”.

Coinbase’s share price is up 278% year-to-date.

The second-largest holding in the IBLC fund is Texas-based Riot Platforms, with a 12.4% weighting.

On 7 November, Riot Platforms posted Q3 earnings announcing £51.9m total revenue, and recording an “all-time record” hash rate capacity of 10.9 EH/s. The company said it mined 1,106 bitcoin in Q3, and a total 4,996 to-date in 2023.

Riot stock has surged a massive 306.2% year-to-date.

Spot Bitcoin ETFs Could Transform Sector

Bloomberg Intelligence analysts predict spot bitcoin ETFs will be approved in early January, and that the move will have a radical impact on the sector. Names including BlackRock [BLK] are amongst those vying to launch the funds, which would enable ordinary investors to more easily invest in crypto, while minimising risk.

It’s a long way from crypto’s implosion a year ago, when the FTX exchange collapsed. Anthony Rousseau, Head of Brokerage Solutions at TradeStation, last week told Morningstar he believed bitcoin was well-placed for a bull run, rising above $40,000 and reaching an all-time high by 2024’s end. Meanwhile, Cory Mitchell, an analyst with Trading.biz, forecasts an “acceleration phase” for the cryptocurrency, according to CoinDesk.

At TipRanks, IBLC is rated a ‘moderate buy’ by a consensus of 37 analysts. The average price target of $27.41 represents a 23% increase from its last close on 1 December.

COIN is rated a ‘hold’ by 20 analysts, with an average price target of $89.78 representing potential downside of 32.9%.

A consensus of nine analysts rate Riot Platforms a ‘strong buy’. The average price target is $16.57, 20.3% up from its last close.