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Buy the Builders of the Blockchain

March 07, 2022

Read Time 2 MIN

Summary

Digital assets mining companies pose a unique investment opportunity as valuations continue to grow from price appreciation of listed securities and new listings.



Digital assets applications, technology and use-cases have exploded in recent years, supported by both retail and institutional participants. Digital assets miners have emerged as a crucial part of this burgeoning ecosystem, and play a critical role in the validating and processing of blockchain transactions. Miners now represent the largest group of companies within the broader digital assets ecosystem, and have seen their valuations grow significantly in recent years. The VanEck Digital Assets Mining ETF (NASDAQ: DAM) provides exposure to companies participating in the digital assets mining ecosystem.

Digital Assets Mining is Critical to Blockchain Technology

Mining is the process by which new units of cryptocurrency are created. Miners use specialized computer chips in conjunction with software to solve complex math problems. In solving these problems, transactions that exist in the current block are verified by multiple participants. As the problems are solved, miners are rewarded with newly issued cryptocurrency. Of the publicly-traded digital assets mining companies in the investment universe, the vast majority are focused primarily on mining Bitcoin.

Mining Cryptocurrencies: From Transaction to Reward

Mining Cryptocurrencies: From Transaction to Reward

Source: VanEck.

Digital Assets Miners Represent the Largest Segment of Digital Assets Companies

Digital assets mining companies comprise the largest weight of the MVIS Global Digital Assets Equity Index, which represents the entire digital assets opportunity set. The universe of digital assets companies includes a number of different types of businesses, ranging from miners to exchanges to banking companies. Over time, we expect that more digital assets mining companies will become publicly-traded companies, and that the valuation of the miners as a group will also continue to grow.

Crypto Miners on the Rise

Crypto Miners on the Rise

Source: MVIS, VanEck as of 12/31/21. Weights reflect the percentage the MVIS Global Digital Assets Equity Index with primary exposure to a specific business line. Business lines are defined and evaluated by the index provider and VanEck.

Digital Assets Miner Valuations Have Exhibited Strong Growth in Recent Years

As the digital assets ecosystem and adoption has grown, so have valuations of digital assets miners. As a group, crypto miner valuations have grown primarily from two main sources – price appreciation of listed securities and new listings. Going forward, we anticipate that the size of the digital assets mining market should grow, as more companies come to market, and as digital assets adoption grows.

Market Cap of Publicly-Traded Digital Assets Mining Companies (12/31/2018 – 2/28/2022)

Market Cap of Publicly-Traded Digital Assets Mining Companies (12/31/2018 - 2/28/2022)

Source: VanEck. Factset.

Access the Opportunity

Consider the VanEck Digital Assets Mining ETF (NASDAQ: DAM) when positioning your portfolio to include digital assets mining companies:

  • Digital assets miners secure, record and store data on the blockchain
  • Industry supported by high current demand for digital assets
  • Integral, high-growth segment of the digital assets economy

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Important Disclosures

MVIS Global Digital Assets Equity Index: intends to track the largest and most liquid companies in the digital assets segment.

The information herein represents the opinion of the author(s), an employee of the advisor, but not necessarily those of VanEck. The securities/ financial instruments discussed in this material may not be appropriate for all investors. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. This material has been prepared for informational purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security/financial instrument, or to participate in any trading strategy.

Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data.

The Fund will not invest in digital assets (including cryptocurrencies) (i) directly or (ii) indirectly through the use of digital asset derivatives. The Fund also will not invest in initial coin offerings. Therefore the Fund is not expected to track the price movement of any digital asset.

Investors in the Fund should be willing to accept a high degree of volatility in the price of the Fund’s Shares and the possibility of significant losses. An investment in the Fund involves a substantial degree of risk. An investment in the Fund is not a deposit with a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Therefore, you should consider carefully various risks before investing in the Fund, each of which could significantly and adversely affect the value of an investment in the Fund.

An investment in the Fund may be subject to risks which include, among others, risks related to investing in digital transformation companies, investing in equity securities, Canadian issuers, small- and medium-capitalization companies, information technology and financials sectors, foreign securities, market, operational, index tracking, authorized participant concentration, new fund, absence of prior active market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares, non-diversified and concentration risks which may make these investments volatile in price or difficult to trade. Small- and medium-capitalization companies may be subject to elevated risks.

The technology relating to digital assets, including blockchain, is new and developing and the risks associated with digital assets may not fully emerge until the technology is widely used. Digital asset technologies are used by companies to optimize their business practices, whether by using the technology within their business or operating business lines involved in the operation of the technology. The cryptographic keys necessary to transact a digital asset may be subject to theft, loss, or destruction, which could adversely affect a company’s business or operations if it were dependent on the digital asset. There may be risks posed by the lack of regulation for digital assets and any future regulatory developments could affect the viability and expansion of the use of digital assets.

Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.

Cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Cryptocurrencies are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not generally backed or supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies. The value of cryptocurrency may be derived from the continued willingness of market participants to exchange fiat currency for cryptocurrency, which may result in the potential for permanent and total loss of value of a particular cryptocurrency should the market for that cryptocurrency disappear. Cryptocurrencies are not covered by either FDIC or SIPC insurance.

Investing in cryptocurrencies comes with a number of risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, cryptocurrency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing. There is no assurance that a person who accepts a cryptocurrency as payment today will continue to do so in the future.

The features, functions, characteristics, operation, use and other properties of the specific cryptocurrency may be complex, technical, or difficult to understand or evaluate. The cryptocurrency may be vulnerable to attacks on the security, integrity or operation, including attacks using computing power sufficient to overwhelm the normal operation of the cryptocurrency’s blockchain or other underlying technology. Some cryptocurrency transactions will be deemed to be made when recorded on a public ledger, which is not necessarily the date or time that a transaction may have been initiated.

  • Investors must have the financial ability, sophistication and willingness to bear the risks of an investment and a potential total loss of their entire investment in cryptocurrency.
  • An investment in cryptocurrency is not suitable or desirable for all investors.
  • Cryptocurrency has limited operating history or performance.
  • Fees and expenses associated with a cryptocurrency investment may be substantial.

There may be risks posed by the lack of regulation for cryptocurrencies and any future regulatory developments could affect the viability and expansion of the use of cryptocurrencies. Investors should conduct extensive research before investing in cryptocurrencies. Past performance is not a guarantee of future results.

Information provided by Van Eck is not intended to be, nor should it be construed as financial, tax or legal advice. It is not a recommendation to buy or sell an interest in cryptocurrencies.

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