Ben Strack

<div id="highlights-block_62bcaeb209177" class="highlights">
 <ul>
 <li>New vehicle is set to lend a portion of its underlying crypto to offset operating costs</li>
 <li>WisdomTree executive says “we are not shifting our strategy amidst current conditions”</li>
 </ul>
 
</div>



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.



<a href="https://cms.blockworks.co/proshares-to-launch-first-us-etf-thats-bearish-on-bitcoin/" target="_blank" rel="noreferrer noopener">ProShares launched an ETF</a> last week that aims to deliver the inverse of the performance of the S&amp;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 &#8216;buying the dip&#8217; 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.



<h3 class="wp-block-heading">Competitors focused on long-term outlook</h3>



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 &#8216;crypto winter,&#8217; 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.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/thebreakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forwardguidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha directly in your inbox.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/supplyshock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

21Shares

21Shares Vying To Build Out ‘Crypto Winter’ Suite

<div id="highlights-block_61d72c54a5e0d" class="highlights">
 <ul>
 <li>The metaverse is currently a challenging environment to invest in, according to ETF Trends Managing Editor Lara Crigger</li>
 <li>VanEck’s Gold and Bitcoin Strategy ETF is a unique product to keep an eye on, industry watchers say</li>
 </ul>
 
</div>



Several more metaverse ETFs will likely become available to US investors this year, industry professionals said, though the prospect of spot bitcoin and ether futures products remain less clear.&nbsp;



Fund managers <a href="https://www.sec.gov/Archives/edgar/data/0001364608/000144554621006106/etf2_485a.htm" target="_blank" rel="noreferrer noopener">First Trust</a> and <a href="https://cms.blockworks.co/proshares-files-for-metaverse-etf/" target="_blank" rel="noreferrer noopener">ProShares</a> filed for metaverse ETFs last month. The filings followed <a href="https://www.sec.gov/Archives/edgar/data/1650149/000089418921007293/subversivecombined485adocs.htm" target="_blank" rel="noreferrer noopener">Subversive Capital’s plans</a> — disclosed in October — to launch a metaverse ETF with the planned ticker PUNK.



There are already a few metaverse-focused ETFs trading in the US. Roundhill Investments’ Roundhill Ball Metaverse ETF (META), which launched in June, has roughly $950 million in assets, according to ETF.com. Exchange Traded Concepts launched the Fount Metaverse ETF (MTVR) in October, and that fund has about $14 million in assets.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;



Though more people seem to be realizing that digital assets and digital infrastructure is the way of the future, the metaverse is “a little thin on the ground when it comes to investability,” according to Lara Crigger, managing editor of <a href="https://www.etftrends.com/" target="_blank" rel="noreferrer noopener">ETF Trends</a>.



“I don’t really know that the industry has the bandwidth to support more than one of these funds, or maybe one or two,” she said during a Jan. 4 <a href="https://etfprime.com" target="_blank" rel="noreferrer noopener">ETF Prime podcast</a> hosted by The ETF Store President Nate Geraci.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Maybe in a few years the picture’s going to look different, but for now I think you’re going to see a lot of crossover in holdings among these funds and a lot of non-pure-play names in the portfolios.”</blockquote>



META’s top five holdings are NVIDIA, Meta Platforms (formerly known as Facebook), Roblox, Microsoft and Unity Software. Tech behemoths Apple and Amazon are also within the top 10 holdings.&nbsp;



Meanwhile, Apple is MTVR’s number one holding with a 14.7% weighting, according to ETF.com. Meta Platforms is second at 6.4%, followed by Alphabet, Pearl Abyss and Kakao Games.



<h3 class="wp-block-heading">Spot bitcoin versus ether futures</h3>



Crigger and Geraci said they don’t expect the US Securities and Exchange Commission (SEC) to approve a spot bitcoin ETF in 2022.



Though Bloomberg Intelligence Analyst James Seyffart agreed during the podcast that a spot bitcoin ETF in the US is unlikely this year, he noted that the SEC’s rulings on other types of ETFs could signal the fate of such products.



The SEC approved several bitcoin futures ETFs in 2021 that were filed under the Investment Company Act of 1940. These were exempt from the 19b-4 process, Seyffart noted, which puts the onus on the applicant to allay the concerns of the SEC&#8217;s Division of Trading and Markets.



But the agency will likely rule in April on futures-based bitcoin products from <a href="https://teucrium.com/" target="_blank" rel="noreferrer noopener">Teucrium</a> and <a href="https://cms.blockworks.co/?s=valkyrie" target="_blank" rel="noreferrer noopener">Valkyrie Investments</a>, which were filed under the Securities Act of 1933 — the regulation under which spot bitcoin ETFs are filed.&nbsp;



The SEC has <a href="https://cms.blockworks.co/sec-rejects-vanecks-proposed-spot-bitcoin-etf/" target="_blank" rel="noreferrer noopener">denied proposed spot bitcoin ETFs </a>in recent months, citing that bitcoin markets lack surveillance and may be subject to manipulation.



“What this does is it kind of opens the SEC to a form of attack,” Seyffart said of the upcoming rulings on the proposed products by Teucrium and Valkyrie. “They kind of have to make a decision here. They’ve been very iffy on their reasoning, and they haven’t defined what a market of significant size is.”



Grayscale Investments <a href="https://cms.blockworks.co/grayscale-files-to-convert-its-bitcoin-trust-into-an-etf/" target="_blank" rel="noreferrer noopener">filed to convert</a> the Grayscale Bitcoin Trust (GBTC) to an ETF. The firm subsequently <a href="https://cms.blockworks.co/grayscale-attorneys-argue-sec-for-spot-bitcoin-etf-approval/" target="_blank" rel="noreferrer noopener">argued in a letter</a> that the approval of bitcoin futures-based ETFs, but not spot ETFs like GBTC, is “arbitrary and capricious.” Such rulings violate the Administrative Procedure Act (APA), the letter states, which requires federal agencies to treat “like situations alike.”



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“If Grayscale is denied in the beginning of July…to convert GBTC, I could see Grayscale filing an APA lawsuit to try to go there,” Seyffart said. “Maybe the SEC decides they don’t want to deal with that.”</blockquote>



Seyffart also reiterated <a href="https://cms.blockworks.co/when-could-an-ethereum-futures-etf-hit-the-us-market/" target="_blank" rel="noreferrer noopener">his stance</a> to Geraci during the podcast that he expects an ether futures-based ETF to gain approval before a spot bitcoin fund.&nbsp;



Derivatives marketplace CME Group launched ether futures in February, citing an increased institutional demand for transparent, exchange-listed crypto derivatives. CME Group introduced bitcoin futures in December 2017.



Geraci agreed with Seyffart, noting, “I just think for consistency, the SEC is going to have a bit of a more difficult time not approving that after approving the CME-traded bitcoin futures ETFs.”



<h3 class="wp-block-heading">Other crypto-related ETFs on the way in 2022</h3>



Grayscale <a href="https://cms.blockworks.co/grayscale-seeks-to-launch-its-first-equity-etf/" target="_blank" rel="noreferrer noopener">filed in November to launch</a> its first equity ETF. The proposed Future of Finance ETF (GFOF) would track an index consisting of US and non-U.S. equity securities involved in the advancement of the digital economy.



“I believe that the most exciting thing about the digital economy is how early it still is,” Grayscale CEO Michael Sonnenshein said in <a href="https://grayscale.com/2022-h1-ceo-investor-letter/" target="_blank" rel="noreferrer noopener">an investor letter</a> published on Thursday.&nbsp;



Another product likely to be approved in the coming months is the VanEck Gold and Bitcoin Strategy ETF. The firm revealed in a <a href="https://www.sec.gov/Archives/edgar/data/1137360/000113736021001182/vvtgoldandbitcoinstrategye.htm" target="_blank" rel="noreferrer noopener">Dec. 17 disclosure</a> that the planned actively managed offering would invest in gold and bitcoin futures contracts, gold-linked instruments, and exchange-traded products that provide exposure to gold or bitcoin.



“[People say] that bitcoin’s going to replace gold or bitcoin is the new gold or people hold bitcoin for the same reason that they hold gold, and I don’t think that’s true always,” Crigger said. “I think it’s interesting that they would pair those two together.”



Geraci added that VanEck could have difficulty marketing the product.&nbsp;



“Gold bugs and the bitcoin maxis tend to go at each other’s throats,” he said. “Who are you marketing to here?”



<hr class="wp-block-separator">
Get the day’s top crypto news and insights delivered to your inbox every evening.&nbsp;<a href="https://cms.blockworks.co/newsletter/?source=end" target="_blank" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.
<hr class="wp-block-separator">