Reality Shares has announced the closure of two Exchange-Traded Funds (ETFs). These are the Nasdaq NexGen Economy China ETF (BCNA) and the DQM Long ETF Fundstrat (DQML).
BCNA was launched in June 2018 and was the first ETF specifically dedicated to Chinese blockchain companies. It is traded on the NASDAQ, while the DQML is traded on NYSE Arca. The scheduled date for closure is October 22nd, 2019.
The liquidation of the two Reality Shares ETFs will start on October 29th and the funds will be distributed proportionally to all remaining shareholders.
The reasons that led the company to this choice have not been disclosed, although the press release announcing the closure highlights the risks associated with these investments.
In particular, BCNA has higher volatility than a more diversified fund, making it more susceptible to individual events of an adverse nature.
Analysing the graph of the quotation’s trend, it is possible to observe a volatility that appears to be quite sustained when compared to the traditional financial markets, but certainly not with regard to the cryptocurrency ones.
The ETF made its debut in June of 2018 with a price of $24.2, then fell to $17.7 in March 2019. It then rose to $26.2 in May and then fell back to its current $21 level.
In addition, the company also claims that the fund is subject to specific risks associated with investments in Chinese companies, such as exposure to currency fluctuations, low liquidity, lack of information, diverging legal standards and potential unavailability of shares. This leads to a high turnover of the portfolio with consequent high transaction costs.
Finally, they state that there is no guarantee that blockchain technology will affect the main lines of business in the companies included in the fund’s portfolio.
The market performance of the DQML, on the other hand, has been less volatile.
The graph shows that at launch in November of 2018, the price was $24.4, after which it fell to $11.8 the following month, but already in January 2019 recovered the market placement value, and then went up to a maximum of $27 in July. Now the value is around $26.2.