ETF Wrap: Is a new ‘crypto’ fund the long-awaited bitcoin ETF in disguise

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The holy grail for crypto enthusiasts was a pure exchange traded fund that invested in crypto. It doesn’t seem like we’re getting any closer at least until the end of 2021. Gary Gensler, as the new chairman of the Securities and Exchange Commission, seems to be keen to ensure that future investor protection is in place, and rightly so.

However, MarketWatch caught up with Matt Hougan, the chief investment officer of Bitwise Asset Management, formerly chief executive officer of ETF.com, whose new fund may be attractive to those craving a bitcoin ETF. One selling point is that the fund can keep its appeal even if a Bitcoin ETF eventually emerges.

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Weekly ETF movements
Last week’s top 5 winners

% Power

VanEck Vectors Oil Services ETF OIH, -1.05%

2.4

Invesco Diversified Yield Diversified Commodity StrategyPDBC

1.2

First Trust Global Tactical Commodity Strategy Fund FTGC, -2.09%

0.9

iShares GSCI Commodity Dynamic Roll Strategy ETF COMT, -2.97%

0.9

Global X Copper Miners ETF COPX, -2.85%

0.9

Source: FactSet, until close of trading on Wednesday, May 12, excluding ETNs and leveraged products

Top 5 decliners of the last week

% Power

iShares MSCI Taiwan ETF EWT, + 1.88%

-9.8

Invesco WilderHill Clean Energy ETF PBW, -1.11%

-8.6

Amplify Transformational Data Sharing ETF BLOK, -3.28%

-8.3

ALPS Clean Energy ACES, + 0.13%

-7.9

iShares US Home Construction ETF ITB, + 2.31%

-7.7

Source: FactSet, until close of trading on Wednesday, May 12, excluding ETNs and leveraged products

What happened

Weekly ETF performance across the board was poor as investors grappled with the heightened threat of inflation and chose themes and strategies that they believe will do better in this environment.

Read: What does inflation mean for the stock market? It’s supposed to be positive – but investors are now scared

See: The biggest fear of inflation in 40 years is coming – what stock market investors need to know

VanEcks Oil-Services CL.1, -3.69% fund achieved a return of 2.4% among the best performers over the course of the week. And signs that inflation is soaring appear to be helping to boost commodity-focused funds broadly, including those for copper-HG00 (-1.20%) as the COVID-19 pandemic on its way of coronavirus vaccines and parts taking control of parts of the world is easing treatments.

A recent research from FlexShares shows that factors such as “value, size, and dividend yield” tend to be strong gains during the economic recovery currently underway in the US.

“Given the historical relative outperformance of size and value factors during an economic recovery – with an average excess return of 15% and 6.5% respectively in this environment – investors may want to consider ETFs with a bias towards value stocks and lower market capitalization” , write the staff at FlexShares.

FlexShares

Is there an ETF for this?

Bitwise Asset Management launched Bitwise Crypto Industry Innovators’ ETF BITQ earlier this week, which is -4.48%.

There are many funds out there trying to capitalize on the growth of the crypto and blockchain market, but Hougan argues that this fund is different primarily because it is allowed to include “crypto” in the title. This might sound like window dressing, but regulators are forcing a company / sponsor to use a certain word on behalf of a fund to put their money where it is.

“It’s the first ETF whose name includes crypto, and that’s because it’s over 80%,” Hougan said.

The ETF pro felt that people are excited about the idea of ​​a -7.92% Bitcoin BTCUSD fund because they are interested in the idea of ​​the world’s leading digital asset, but may not be directly interested in it want to keep.

Bitcoin is inherently volatile and difficult to value, which may be one reason the SEC has been reluctant to advance a crypto fund packaged in ETFs.

On Tuesday, the SEC said in a statement that investors “should be aware of Bitcoin’s volatility” as well as “the lack of regulation and the potential for fraud or manipulation in the underlying Bitcoin market.” The statement referred to the growing Bitcoin futures market and mutual funds, but the message implies that the SEC is moving cautiously in this sector.

On Thursday, Bitcoin prices at CoinDesk fell 10% to around $ 50,170, hitting a 24-hour low of $ 46,294.12, a month after an all-time high of around $ 64,000. Bitcoin slipped on Wednesday after Musk said he would no longer accept the crypto in Tesla stores. This has put the broader complex of digital assets on its way down, with the assets pegged to Ethereum ETHUSD (-6.08%).,
the second largest crypto in the world, also in the red. This includes meme asset Dogecoin DOGEUSD, -11.57%.

BITQ consists of 30 companies and is weighted according to market capitalization, but limited to 10%. The crypto platform Coinbase Global COIN is the largest holding with -5.15%. Michael Saylor’s MicroStrategy Inc. MSTR (-4.96%) is another important component, as is Mike Novogratz’s Galaxy Digital Holdings GLXY (-7.88%) and the bitcoin miners Riot Blockchain RIOT (-13.01%) and Marathon Digital Holdings MARA (-11.42%)..

This is not a Bitcoin ETF, there are a number of filings with the SEC, but for many investors able to endure the wild moves of the crypto, this could be an alternative.

“This is not a Bitcoin ETF, but it does hold the companies that are growing it [crypto] Infrastructure, ”said Hougan.

It’s worth noting that there is at least one notable player in the digital asset world with a fund composition similar to that of BITQ.

VanEck Vectors Digital Transformation ETF DAPP, -4.31%,
The company, which celebrated its debut last month, is intended to give owners the opportunity to deal with the “digital transformation of the economy”. It owns a number of the same companies as Bitwise but is untitled “Crypto” and with a lower expense ratio of 0.65% versus 0.85% for Bitwise.

DAPP is down 16% to start off this week.

Chart of the week

Tech stocks were penalized in the recent sell-off that overwhelmed the Dow Jones Industrial Average, S&P 500 index, and Nasdaq Composite index on Wednesday. However, Cathie Wood’s Ark Innovation Fund posted the worst drop in stocks, reports the Wall Street Journal.