WisdomTree CEO: Crypto Winter Brings ‘Lots of Opportunity’

Digital asset-focused investment manager WisdomTree sees opportunities to profit from crypto’s recent churns — including expanding the company’s regulatory prowess in a bid to gain additional clients. 

WisdomTree, which offers a range of ETFs, ETPs, indexes and model portfolios, ended the second quarter with $74 billion assets under management — down 6.4% from the prior quarter due to market depreciation. 

The company’s assets dip came despite net inflows of $3.9 billion, primarily due to flows into WisdomTree’s fixed-income products. Assets under management within the firm’s crypto products plummeted about 60% from $383 million to $151 million despite net inflows of $3 million into those offerings.

WisdomTree’s operating revenues decreased about 1% quarter over quarter to $77 million. Its net income jumped from a loss of about $10 million in the first quarter to a gain of $8 million in the second quarter. The company’s stock price was $5.20 at 4pm ET, down 1.7% for the day.

A continued focus on digital assets

Though the industry saw robust funding, ads during the Super Bowl and crypto firms promising “too-good-to-be-true” offerings over the past year, CEO Jonathan Steinberg said on an earnings call Friday, the landscape has shifted dramatically in recent months. 

“While some companies have struggled with the realities of regulation and risk management, and other companies have lost the trust of their customers and investors completely, for WisdomTree, the timing of this crypto winter is very constructive and brings lots of opportunity,” Steinberg said. 

Bitcoin and ether are each down about 65% from their all-time highs reached last November amid higher-than-normal inflation and turmoil for certain crypto companies. 

Terra’s algorithmic stablecoin TerraUSD (UST) and its LUNA token crashed in May, rattling crypto markets beyond those assets. Three Arrows Capital, Voyager Digital and Celsius all filed for bankruptcy over the past month as they dealt with liquidity and insolvency issues. 

“With these bankruptcies and these client losses, I think a lot of people don’t trust their counterparts in the crypto space the same way,” Will Peck, WisdomTree’s head of digital assets, told Blockworks in an email. “WisdomTree has a great brand, reputation and culture of risk management and regulation, and we’re going to be well-served to pick up a lot of customers for both ETPs, indexes and WisdomTree Prime.” 

Many of the firm’s clients in the US and Europe view the current market environment as a good entry point to get involved in digital assets, Peck noted.

WisdomTree Prime, a consumer financial app that the firm first revealed plans for in January, is in its initial stages of beta testing. It is designed to allow users to save, spend and invest in cryptoassets such as bitcoin and ether, blockchain-enabled funds and tokenized versions of physical assets, such as gold and US Treasurys. 

The fund group has minted a dollar token, Steinberg said, adding that the minting of a gold token is “imminent.”

Initial beta users will be invited from the company’s waitlist, Peck said, adding that there will be “a measured rollout” in the coming months as the firm continues to get user feedback.

Executives said on the call that WisdomTree expects to see revenues from its digital assets initiatives beginning in 2023, but declined to comment on specific projections.   

“The end goal is to deliver financial services to customers faster, cheaper and with better outcomes than exist today,” the CEO said. “Over time we expect all financial assets to eventually move onto the blockchain infrastructure.”

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