Defiance Debuts ETF To Short Blockchain Companies
New offering shorts the largest blockchain ETF with top holdings that include Core Scientific, Silvergate and Accenture
Blockworks Exclusive Art by Axel Rangel
key takeaways
- Amplify Investments’ Transformational Data Sharing ETF (BLOK) is down roughly 50% year to date
- Though Defiance is bullish on crypto long-term, CEO says being short crypto firms will provide the best downside protection in the current environment
ETF provider Defiance has launched a fund that bets against the blockchain industry by holding short positions in the largest blockchain ETF in the US.
As the industry grapples with the downturn in crypto and traditional markets, the Defiance Daily Short Digital Economy ETF (IBIT) seeks daily inverse returns of Amplify ETFs’ Transformational Data Sharing ETF (BLOK).
The fund group had revealed plans to launch IBIT in April.
The new fund enters short positions of the actively managed BLOK fund, which includes top holdings Core Scientific, Silvergate, Accenture, IBM and Overstock.com, as of Wednesday.
BLOK has returned about 26% since its inception in 2018, but the fund is down roughly 50% year to date and about 15% in the past month. The ETF has about $540 million in assets.
Though Defiance remains bullish on the growth of crypto over the next few years, CEO Sylvia Jablonski said in a statement, the executive pointed to the recent layoffs and revenue losses around the industry.
“We believe shorting positions such as Coinbase, Galaxy and Robinhood, along with those involved in the metaverse — like Meta and Roblox — will provide the best downside protection in the current environment,” she added.
Coinbase is down about 73% year to date, while Galaxy Digital and Robinhood’s stock price has dropped roughly 70% and 47%, respectively, so far in 2022.
When the Federal Reserve stops hiking interest rates and inflation starts to wane, investors are likely to dip their toes back into crypto, Jablonski told Blockworks.
“Investors are taught to have well diversified portfolios, a barbell approach, or hedges for tough times,” she said in an email. “Having a product available to cover the crypto space in this same spirit could be very advantageous to traders and investors alike.”
Defiance has seven ETFs trading in the US with roughly $1.2 billion in combined assets, according to ETF.com. Its largest is its Next Gen Connectivity ETF (FIVG), which has gathered nearly $1 billion in assets since its March 2019 launch.
The firm in December launched the Defiance Digital Revolution ETF (NFTZ), which invests in companies with exposure to NFTs, blockchain and cryptocurrency. Like BLOK, NFTZ has Silvergate as a top-five holding, alongside Marathon Digital, Draftkings, Cloudflare and Robinhood.
NFTZ, which has gathered just $6 million in assets during its time on the market, is down about 63% so far this year.
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