Crypto is a ‘long-term play’ we’re building out now: Global X exec
The buildout of blockchain use cases will play large role in valuing crypto assets, according to Global X head of thematic solutions
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Global X, an ETF issuer, is adopting a gradual approach to expanding its crypto business, aligning with the evolving use cases surrounding blockchain technology.
The company last week introduced two separately managed account (SMA) offerings based on digital assets. These SMAs will be accessible through Eaglebrook Advisors’ platform, which is utilized by registered investment advisers (RIAs).
One of the indexed offerings holds the two largest crypto assets, while the other’s index gives market capitalization-proportional exposure to the 10 largest tokens, with a cap at 40%.
“[The SMAs] are about getting into direct crypto exposure in a way that we thought was responsible,” Scott Helfstein, Global X’s head of thematic solutions, told Blockworks. “This just allows us to provide some tools and begin to build interest in what we think is a long-term play.”
The utility of crypto assets will ultimately drive their valuations, he added — a fact not necessarily true today as various use cases have not yet been realized.
“But as we talk about moving real estate onto the blockchain [and] as we talk about 3D printing and advanced fabrication where you’re transacting through Ethereum smart contracts, all of those become the use cases that ultimately set the value for these currencies,” Helfstein said. “We’re a ways away from that, but still getting to play in the space we think is important.”
The SMAs build upon Global X’s crypto and blockchain offerings. The fund group, which manages $41 billion in assets across its more than 100 US ETFs, launched its Global X Blockchain ETF (BKCH) in July 2021.
It unveiled the Global X Blockchain and Bitcoin Strategy ETF (BITS), which blends investments in crypto stocks and bitcoin futures contracts, a few months later.
The firm added a Metaverse ETF (VR) to its lineup in April 2022, and has invested in its team and research capabilities in an effort to educate investors about the sector.
“What we’re trying to do is create a full toolkit rather than saying here’s a ticker to buy,” Helfstein said. “Here’s a ticker to look into, here’s some research to help you make a decision, and by the way, there are different flavors.”
Asset growth slows as space matures
Despite extended periods on the market, BKCH, BITS and VR have roughly $80 million in combined assets.
While the ProShares Bitcoin Strategy ETF (BITO) and the Amplify Transformational Data Sharing ETF (BLOK) have gathered significant assets in their fund categories — about $460 million and $820 million, respectively — most competing offerings have not.
While early assets into thematic ETFs are driven by retail investors, large companies — such as wirehouses Morgan Stanley, JPMorgan and UBS — drive scale later on, Helfstein said.
“Quite frankly, most firms are not encouraging advisers to go out and talk about blockchain and crypto as an area,” the executive noted.
That is likely to change as blockchain technology “moves up the adoption curve” and the companies involved in the space get bigger, Helfstein added.
The Global X Lithium and Battery Tech ETF (LIT), which launched in 2010 and has grown to more than $3 billion in assets under management, particularly gained traction as the electric vehicle market grew.
“That’s one where we had this sitting on our shelf for a really long time before it was a billion-dollar fund,” he said. “So if you’re going to play in the thematic space and you want to be early in the adoption cycle, you’re going to have to live with this.”
The metaverse space is also in its very early stages.
Though a blockchain-powered Web3 has a chance to improve upon Web2, players in the space have their work cut out for them to prove out the value proposition, Helfstein said.
“People ask what replaces Google?” he added. “I don’t know that it goes away, but the environment changes when I can own my private data in a digital wallet and I can either trade it for access to my gmail or they have to pay me for it. That’s a very different ecosystem.”
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