The VanEck Crypto and Blockchain Innovators UCITS ETF is an exchange-traded fund that invests in companies associated with blockchain technology to bring new innovations to finance and various other sectors. The main goal of the ETF is to replicate the MVIS Digital Assets Equity Index (MVDAPP).
The MVDAPP is a modified market cap-weighted index that tracks the performance of the biggest and most liquid companies in the digital assets industry. Trading under the ticker “DAPP”, it is one of the top-performing ETFs of this year in May but since then, it has faired moderately in the market.
What exactly is the VanEck Crypto and Blockchain Innovatore ETF or DAPP?
The DAPP ETF is a type of investment that helps the user gain exposure to companies that are constantly involved with various cryptocurrencies or blockchain technology. In this, the stocks of numerous companies that are associated with the crypto market through various activities like trading or mining, are grouped into a cluster and offered on various trading platforms to be traded as ETFs.
This helps the user to invest in these companies’ shares without having to own them directly. This saves the users the hassle of constantly worrying about the company’s standing or performance in the market.
How does the DAPP ETF work?
At first, VanEck and the associated companies involved in the ETF purchase various shares of crypto-related companies that are made public. After these purchases are made, they are pooled and stored by some third party to ensure the proper safekeeping of the assets. It is the responsibility of this person or organization to secure these shares and protect them from any unauthorized access.
ETF also makes use of a create-redeem mechanism that allows the ETF to be traded on various exchanges as a single stock while still being related to the underlying assets they track. This helps in maintaining the NAV or Net Asset Value of the ETF.
In this scheme, the price of the ETF is affected by the price of the various underlying stocks associated with the numerous countries. In the DAPP ETF, the number of company shares that are pooled is approximately 25. Based on the performance of these companies, the price of the DAPP may surge or drop.
Advantages of the DAPP ETF
Investing in an ETF comes with a series of advantages. Here, we are going to discuss some of them in detail.
- Convenience: Investing in DAPP is much more convenient and less complex than investing in the underlying stocks separately.
- Diversification: One of the major specialties of the ETF is that it may contain numerous underlying stocks. This can help mitigate risks to a great extent.
- Secure storage: By making use of a third-party custodian to store and secure your assets, the investors no longer have to worry about safeguarding their assets.
- Low investments: The ETF does not require you to make a huge investment from the get-go, it can also support low investments.
Risks associated with the DAPP ETF
We looked into various advantageous features of the DAPP ETF in the previous section. For everything that seems advantageous, there is always a catch associated with it. Here, we are going to look into that more, the various disadvantages that come with the DAPP ETF.
- Add-on charges: Alongside the brokerage commission fee, the investors are also required to pay a recurring asset management fee for the safekeeping of assets.
- Tracking error: Sometimes, there are tracking issues regarding the price tracking of various underlying shares, especially during a volatile session in the market.
- Tax: During the selling of successful ETFs, investors are asked to pay a good amount of money as tax to the government.
It means that even though ETFs are somewhat less risky and profitable, they come with their fair share of baggage.
Conclusion
The DAPP ETF provides users with a good opportunity to invest in various companies associated with the crypto market. But, it does not allow you to own the stocks of the company you invested in. And, there is a huge difference between investing in a stock directly and indirectly, especially when it comes to the profit you reap.
Also, sometimes it can be a hassle to invest in these ETFs due to various add-on charges and taxes. So, if you’re looking to invest in the DAPP ETF, kindly conduct thorough research before proceeding.
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