• New vehicle is set to lend a portion of its underlying crypto to offset operating costs
  • WisdomTree executive says “we are not shifting our strategy amidst current conditions”

Swiss crypto fund issuer 21Shares has launched the first in a planned series of offerings designed to help investors navigate an upside-down crypto market.

The asset manager brought to market the 21Shares Bitcoin Core ETP (CBTC) on the SIX Swiss Exchange on Wednesday. It’s an exchange-traded product (ETP), the equivalent to an exchange-traded fund (ETF) in the US.

With an expense ratio of 21 basis points, CBTC is set to lend a portion of the underlying crypto on a fully collateralized basis to offset operating costs once the product scales.

“The markets influence how we think about innovation and building new products,” CEO Hany Rashwan told Blockworks in an email. “Releasing CBTC, the cheapest physically-backed ETP in the world, was designed to offer investors a more comfortable entry point to access a critical asset class during a choppy market and helps them to optimize portfolio returns.”

21Shares is building additional bear market-friendly funds slated to launch in the second half. Such offerings would include lower-cost products for long-term strategic allocation, or others for investors after shorter-term tactical allocation or risk-controlled exposure.

Lara Crigger, editor-in-chief of investment research firm VettaFi, told Blockworks interest in bearish products is abundant.

ProShares launched an ETF last week that aims to deliver the inverse of the performance of the S&P CME Bitcoin Futures Index. The fund has grown to nearly $30 million in assets.

Though not a short product, 21Shares’ approach to offer long bitcoin exposure in an ETP with a relatively low expense ratio is attractive, Crigger said. She noted its “unique characteristic” to lend out the underlying bitcoin could bring down costs even more.

“If you believe that bitcoin is currently in a bear market, but that it will one day reverse and rebound, then ‘buying the dip’ with a low-cost exposure like this particular ETP is a cost-effective way to stay invested and express that view,” Crigger said.

Rashwan said 21Shares investors are “holding strong and still creating inflows for the long game” — despite market turbulence. The firm notched nearly $30 million in new net assets since mid-May, as 21Shares’ Bitcoin ETP (ABTC) represented roughly 30% of the total.

Competitors focused on long-term outlook

Townsend Lansing, head of product at 21Shares competitor CoinShares, said the firm has not considered launching a product that uses yield to offset operating costs, as CBTC does.

He added that when examining yield products, the company looks for opportunities that offer yield beyond a reduction in the management fee. CoinShares launched physically backed Cosmos and Polygon ETPs that offer exposure to the underlying tokens, plus an additional 5% per year.

“We run a diligence process on all new launches that looks at the coin, the protocol, the founders and other risk metrics, which of course include current and past market dynamics,” Lansing told Blockworks in an email. “Having said that, we tend to take a longer term view with our product strategy, and would tend to be unswayed by shorter-term trends unless they change the risk analysis of the product being launched.”

Will Peck, head of digital assets at fund group WisdomTree, said the company always considers ongoing market conditions and trends when developing new products.

“However, we are fully focused on a long term outlook,” Peck said. “Despite what some are calling the ‘crypto winter,’ our long term perspective is that there will be continued adoption of digital assets and technology over time, so we are not shifting our strategy amidst current conditions.”

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  • Ben Strack is a Denver-based reporter covering macro and crypto-native funds, financial advisors, structured products, and the integration of digital assets and decentralized finance (DeFi) into traditional finance. Prior to joining Blockworks, he covered the asset management industry for Fund Intelligence and was a reporter and editor for various local newspapers on Long Island. He graduated from the University of Maryland with a degree in journalism. Contact Ben via email at [email protected]