VanEck, a global investment manager with over $60 billion in assets under management, has filed an application to create an exchange-traded fund that will track the price and yield performance of the Global Digital Asset Mining index.
Investment principles of the fund
The Global Digital Asset Mining index is used to track the performance of companies involved in digital asset mining, such as Bitcoin or altcoin mining operations. Mining operations providers also include companies that provide a variety of services such as software development and hardware suppliers.
The fund will invest at least 80% of its total assets in DAMC securities, but it is not permitted to invest in digital assets using derivatives products such as options or futures. As a result, the fund will not track the price movement of any cryptocurrency.
The VanEck ETF will be able to provide exposure to companies that are operating with digital assets or holding them on their balance sheets and are included in the Global Digital Assets Mining index.
The application also includes a section on the risks associated with the digital asset mining industry. The main risks for investors, according to the filing, are technological obsolescence, supply chain issues, and certain issues with obtaining new hardware.
Furthermore, the fund agrees that most digital asset mining companies are vulnerable to the issue of relying on third-party companies based and operating in other countries.
In addition to the risks associated with hardware wear, digital asset miners earn money by selling their assets on various cryptocurrency exchanges, and the price of their assets is subject to high volatility, which could result in the loss of their holdings’ value.
While most cryptocurrency miners continue to profit from their operations, rapid changes in assets such as Bitcoin may result in additional losses for those companies and, as a result, losses for investors who have direct exposure to the aforementioned index.