Bitwise Launches Crypto ETF Despite SEC’s ETF Cold Feet

Bitwise CIO Matt Hougan told Blockworks that the reasoning behind its portfolio is based on “building roads, bridges and infrastructure that allows the crypto economy to thrive.”

article-image

Matt Hougan, Chief investment officer, Bitwise; Source: Bitwise

share

key takeaways

  • The Bitwise Crypto Industry Innovators ETF (BITQ) holds a portfolio of 30 different stocks of companies, including Coinbase, Microstrategy, Galaxy Digital, Riot Blockchain and Voyager Digital
  • San Francisco-based Bitwise is known for managing one of the largest crypto index funds

Last week Bitwise launched an ETF that gives investors exposure to high-growth and profitable cryptocurrency companies.

The Bitwise Crypto Industry Innovators ETF (BITQ) holds a portfolio of 30 different stocks of companies, including Coinbase, Microstrategy, Galaxy Digital, Riot Blockchain and Voyager Digital. 

Bitwise CIO Matt Hougan told Blockworks that the reasoning behind its portfolio is based on “building roads, bridges and infrastructure that allows the crypto economy to thrive.” Each of those companies derive 75% of its income from cryptocurrency or has 75% of net assets in crypto, he added.

ETF similarities

Bitwise’s ETF is similar to others, like the actively managed Amplify Transformational Data Sharing ETF (BLOK), which has been around for about three years, as well as the VanEck Vectors Digital Transformation ETF (DAPP), which launched last month. Both funds also target cryptocurrency and blockchain companies. Similarly, JPMorgan Chase revealed it’s creating an ETF-like “Cryptocurrency Exposure Basket.”

BITQ, however, is the first ETF the Securities and Exchange Commission has green-lit to include “crypto” in its name.

“Crypto equities are another important piece of the crypto ecosystem,” Hougan said. “As an investment category, it offers a way for investors to gain exposure to this space in a familiar ETF format that fits into their advisor custodian, that trades like any other ETF and that can be valued using traditional metrics.”

Comfort levels

While many investors have become educated and enthusiastic about investing in digital assets, many of them aren’t comfortable enough to do so yet for a variety of reasons, Bitwise CIO Matt Hougan told Blockworks. 

For example, investors may not be comfortable without a value digital asset. Others may not be able to hold digital assets with their custodian or through their advisory platforms, or their clients are worried about cryptocurrency risks.

“Financial advisors tend to buy assets that are available on their custodian, because they have to be able to custody them for their clients there, they have to print out reports, they charge fees through those advisor reporting platforms,” Hougan said. “Currently, it’s very difficult, though not impossible, to gain access directly to crypto assets through those advisor custodians.”

Today, financial advisors control, by some estimates, almost 30% of wealth in the US.

BITQ offers a way for investors to get exposure to the cryptocurrency industry through a picks and shovels approach — which has been a popular approach to different asset categories — as opposed to investing in the crypto assets themselves. 

San Francisco-based Bitwise is known for managing one of the largest crypto index funds, which tracks an index of the 10 largest digital assets, including bitcoin, ethereum and litecoin. Earlier this year, it also launched a DeFi fund.

Hougan himself is also an authority on ETFs, having covered their rise in the early 2000s – before they got their reputation for providing some degree of safety to investors — and he sees the crypto industry evolving in the same way.

Waiting for bitcoin ETFs

Many investors are eager for a bitcoin ETF to be approved by the Securities and Exchange Commission. Though many have applied, the SEC continues to delay its decision. This week it released comments implying it’s unlikely one will be approved this year. 

Bitwise withdrew its ETF application in December, but Hougan said the company is still trying to win that race.

Many of the people waiting around for a bitcoin ETF are doing so because ETFs fit in financial advisor workflows. Anyone can buy cryptocurrencies through private funds and apps.

For now, the overlapping category of investors interested in both cryptocurrencies and fast growing disruptive technology companies, there’s an increasing basket of large public companies that can be interesting for them, Hougan said.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2023

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research Report Cover Vertex.jpg

Research

The proliferation of new perp DEXs has led to fragmented liquidity across various DEXs and chains. Vertex, known for its vertically-integrated DEX that includes spot, perpetual, and integrated money markets, is now tackling cross-chain liquidity fragmentation through horizontal integration with the launch of new Edge instances. Vertex's integrated offerings and cross-margined account structure amplify the benefits of new instances: native cross-chain spot trading, optimized cross-chain basis trading, consistent interest rates, reduced bridging friction, and more.

article-image

Partnering with EtherFi and Angle, the fully on-chain perp DEX features bespoke collateral

article-image

Sponsored

Gavin Wood introduced the next evolutionary step for the Polkadot network: the Join-Accumulate Machine, or JAM

article-image

The side events were the places to be at Consensus 2024, according to attendees

article-image

Also, who’s come out swinging in the spot ether ETF fee war — and who could undercut them

article-image

I know it is not in their nature, but US regulators could learn a lot by researching the digital asset frameworks that overseas regulators have already gotten right

article-image

Also, the ETF hype train can count out at least one member