Summary Record-setting inflows into crypto funds, driven by Trump's re-election, have bolstered the Global X Blockchain ETF (BKCH), despite its small size and high valuation. BKCH's portfolio is concentrated, with top holdings like Coinbase and Riot Platforms, and features a high price-to-earnings ratio and significant non-US exposure. Bitcoin seasonality trends are bullish, but technical indicators suggest near-term risks, including a bearish RSI divergence and potential downside price gap. I maintain a hold rating on BKCH, citing its rich valuation and technical risks, balanced by positive long-term trends and favorable bitcoin seasonality. Money has poured into the crypto space since the re-election of Donald Trump. Even in the weeks leading up to November 5, bitcoin and crypto stocks were seeing strong inflows, perhaps on the expectation that the new president-elect would indeed construct a bitcoin reserve. EPFR data show that the last eight weeks have featured the biggest net inflow into crypto funds on record. After taking a cautious stance on the Global X Blockchain ETF (BKCH) heading into the third quarter, citing some seasonal risks and a mixed technical outlook around the middle of the year, I see risks with the ETF. Unfortunately, I didn’t get a chance to revisit the fund before the election, and today I reiterate a hold rating following a strong rally from September through November. Record-Setting Inflows Into Crypto Funds BofA Global Research According to the issuer , BKCH seeks to invest in companies positioned to benefit from the increased adoption of blockchain technology, including companies in digital asset mining, blockchain & digital asset transactions, blockchain applications, blockchain & digital asset hardware, and blockchain & digital asset integration, according to Global X. The issuer states that the theme is bigger than just cryptocurrency and that BKCH invests accordingly, with global exposure across multiple sectors and industries. Despite a strong 32% total return since my June analysis, BKCH remains a very small ETF with total assets under management of just $217 million, though that is up from $165 million from late in the first half of 2024. The fund’s annual expense ratio is moderate at 0.50% while the forward dividend yield is near that of the S&P 500 at 1.5% as of December 12, 2024. Share-price momentum has been stellar in recent months, earning BKCH a perfect A+ ETF Grade, according to Seeking Alpha’s quantitative scoring system. The fund is highly risky , however, given a lofty annual standard deviation trend and its concentrated portfolio. Finally, liquidity risks are present since BKCH features average daily volume of barely more than 50,000 shares while its 30-day median bid/ask spread is very high at 0.49%, per Global X ETFs. For a refresher on the portfolio, the 1-star, Negative-rated ETF by Morningstar falls in the lower-right of the style box, indicating its small-cap growth bent. Just 2% of BKCH is classified as value while less than one-fifth of the fund is large cap. Prospective investors should also be aware that BKCH is 18% invested in non-US equities. The price-to-earnings ratio has swelled to above 38 (it was under 20% just six months ago), though the issuer’s website shows a negative earnings multiple. BKCH: Portfolio & Factor Profiles Morningstar Looking closer at the allocation, the top five stocks account for about half of BKCH’s portfolio, so keeping close tabs on both the fundamentals and technicals of Coinbase (COIN), MARA Holdings (MARA), Core Scientific (CORZ), Riot Platforms (RIOT), and Hut 8 (HUT) is key. Those following the industry closely might recall news this week that activist investor Starboard took a stake in RIOT, which offered an encouraging sign for the broader crypto equity space. BKCH: Holdings & Dividend Information Seeking Alpha Perhaps the biggest variable is seasonality with bitcoin. When analyzing trends since 2010, we find that we are in the midst of a strong calendar stretch. Bitcoin has done well from October through July, so this is a tailwind to weigh. Strong Bitcoin Seasonal Trends Barchart The Technical Take With a higher valuation today but bullish crypto seasonality in play, BKCH’s chart shows some near-term risk. Notice in the graph below that the ETF tagged the upper end of its uptrend channel earlier this month. The $77 mark is also key as that’s close to where it bounced (and then fell) in early 2022. Moreover, the rally to a multi-year high came on a weaker RSI momentum mark, which is a bearish divergence. Finally, I am concerned about a downside price gap near $50 that could be filled if we see a protracted pullback. On the plus side, BKCH’s long-term 200-day moving average is rising, suggesting that the broader trend is up and that the bulls control the primary trend. Also, the 50dma is above the 200dma with price above both lines. It would be tough for the bears to take BKCH all the way down to trend-line support under $40 – that would likely require a severe bitcoin bear market in 2025, which seems unlikely given Trump’s pro-crypto stance. BKCH: Shares Touch the Uptrend Channel Line On Bearish RSI Divergence Stockcharts.com The Bottom Line I have a hold rating on BKCH. I see the crypto equity fund as somewhat richly valued while the technical picture points to near-term weakness within a broader uptrend. Bitcoin seasonality is quite bullish, which makes me reticent to issue a sell rating.
