AI ETFs Don’t Stand a Chance Against Crypto ETFs

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The potential of artificial intelligence (AI) to disrupt multiple sectors of the economy has captured the imagination of market participants for years. Still, it appears that crypto is outperforming AI, at least in the world of exchange-traded funds (ETFs).

Crypto is proving to be the clear winner this year, outshining the performance of its artificially intelligent counterparts with several crypto ETFs reporting gains between 9% and 64%.

Crypto Outperforms AI

An ETF, or Exchange Traded Fund, is a type of investment fund and security that tracks a basket of assets, such as stocks, bonds, commodities, or in this case, Artificial Intelligence and Robotics companies. There are several AI/Robotics ETFs, which provide exposure to the performance of the AI and Robotics sector through a diversified portfolio of underlying stocks.

These ETFs offer investors an easy and convenient way to invest in the growth potential of AI and Robotics companies without having to buy individual stocks.

In a recent report, Blockworks concluded that 39 AI/Robotics ETFs on the market are averaging a performance of 12.4% for the year. On the other hand, crypto ETFs are averaging 38.3% for the same period, a difference of 26%, according to the Financial Times.

The best-performing crypto ETF is VanEck’s Digital Transformation ETF (DAPP), which is up a staggering 75% YTD. This ETF tracks some of the most well-known crypto and blockchain firms, including Coinbase, Bitfarms, and Riot Platforms, which are listed on major US exchanges.

Source: Google Finance

Global X’s Blockchain ETF (BKCH) and Bitwise’s Crypto Industry Innovators ETF (BITQ) are also showing impressive performance, up 64% and 61% YTD respectively. Despite the relative outperformance of crypto ETFs, the average total assets in AI ETFs stand at $5.89 billion, which is significantly higher than the average total assets in crypto ETFs, which are around $95 million.

Recent advancements in AI technology, such as OpenAI’s ChatGPT 3 language model and Tesla’s self-driving cars, have generated renewed interest in the sector. A study by PricewaterhouseCoopers predicts that the AI sector will contribute $15.7 trillion to the world’s GDP by 2030, with $6.6 trillion coming from increased productivity and $9.1 trillion from consumption-side effects.

The Future Is Blockchain

Ark Invest, led by Cathie Wood, believes that blockchain and crypto have the potential to match this growth. The firm predicts that cryptocurrencies and smart contracts could command $20 trillion and $5 trillion in market value over the next 10 years.

According to Kenneth Lamont, a senior fund analyst for passive strategies at Morningstar, some technology funds, such as the Ark Innovation ETF (ARKK), are echoing the partial economic recovery seen in the market, although in a more modest manner.

ARKK has seen a 25% increase in value so far this year and is on pace to potentially achieve its best monthly return in history after experiencing a significant drop of 75% during 2021 and 2022.

Lamont stated:

“For those who were confident in the Ark story two years ago, this is now an opportunity to purchase technology at a discounted price.”

Source: Google Finance

The relative youth of the crypto market, combined with its impressive returns, make it a sector worth watching in the coming years.


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