Bitwise Asset Management has launched its debut ETF, a thematic equity strategy offering exposure to publicly listed companies at the forefront of the cryptocurrency industry.
Hunter Horsley, CEO of Bitwise Asset Management.
The Bitwise Crypto Industry Innovators ETF (BITQ US) has listed on NYSE Arca and comes to market through a partnership with white-label ETF platform Exchange Traded Concepts.
The fund targets companies providing the infrastructure – the ‘picks and shovels’ – underpinning the emergence of a digital asset economy.
Matt Hougan, CIO of Bitwise Asset Management, said: “Like e-commerce and mobile before it, crypto is a disruptive technology creating massive opportunities for new companies to emerge as winners.
“Until recently, most great crypto innovators were private companies, but that’s changing rapidly. Today, there’s a growing set of public companies capitalizing on crypto. BITQ aims to identify and give investors access to these businesses.”
Hunter Horsley, CEO of Bitwise Asset Management, added: “Over the past few years, many investors have had to watch from the side-lines as a select few have reaped the rewards of stellar cryptocurrency returns. We’ve heard time and again from clients that the primary challenge has been finding a way to access the incredibly complex and fast-moving crypto space. With BITQ, our aim is to make crypto investment opportunities available through traditional investing platforms and a familiar, liquid, and cost-effective ETF.”
Methodology
The fund tracks the proprietary Bitwise Crypto Industry Innovators 30 Index which is calculated and distributed by Moorgate Benchmarks. Constituents are selected from a global universe of companies with market capitalizations above $100 million and average daily trading volume greater than $1m.
The index consists of two tiers. The first, which accounts for 85% of the index weight at each rebalance, comprises ‘pure-play’ crypto innovators that derive at least 75% of their revenue from servicing cryptocurrency markets. This tier includes miners, equipment suppliers, brokerages, analytics firms, and providers of financial services, while companies with more than 75% of their net assets in liquid crypto asset holdings are also eligible.
The second tier, at 15% of the index weight, consists of large-cap non-pure-play companies that have a significant business initiative focused on the crypto ecosystem or hold at least $100m in liquid crypto assets.
The methodology selects the 20 largest companies from tier one and weights them by float-adjusted market capitalization and chooses the ten largest firms from tier two and weights them equally. The weight of any individual stock is capped at 10% and the cumulative weight of companies with weights above 5% is capped at 35%. Reconstitution and rebalancing occur on a quarterly basis.
The index is designed to adapt quickly to the rapidly changing crypto ecosystem. It contains a “fast-entry” rule that allows for the inclusion of eligible IPOs and direct listings just one day after a company’s debut. As an example of this rule’s impact, Coinbase qualified for inclusion in the index at a maximum 10% weight in mid-April.
The largest constituents in the index are Coinbase (9.6%), MicroStrategy (9.2%), Galaxy Digital (8.1%), Riot Blockchain (7.6%), and Voyager Digital (6.2%). Data as of 7 May.
The ETF comes with an expense ratio of 0.85%.
The fund’s strategy is similar to that of the recently launched VanEck Vectors Digital Transformation ETF (DAPP US) which is listed on Nasdaq and comes with an expense ratio of 0.65%. This fund tracks the MVIS Global Digital Assets Equity Index, providing exposure to a global portfolio of companies deriving significant revenue from the digital assets segment.