Bitwise launches US ‘crypto ETF’… sort of

Bitwise Asset Management has announced the launch of its Crypto Industry Innovators exchange-traded fund.

Unlike the numerous proposals for Bitcoin and cryptocurrency ETFs offering direct exposure to digital assets that the United States Securities and Exchange Commission takes great delight in shooting down, Bitwise’s new fund, dubbed BITQ, offers exposure to the shares of leading “public companies that are participants in the growing Bitcoin and cryptocurrency sector.”

Announcing today's launch of the Bitwise Crypto Industry Innovators ETF (NYSE: $BITQ)! $BITQ holds public companies backing bitcoin and crypto innovation. Available in brokerages now! (BITQ ETF Risk Disclosure: https://t.co/k76Eg2q5GM) pic.twitter.com/jUZHxF4UFz

— Bitwise (@BitwiseInvest) May 12, 2021

BITQ investments are based on Bitwise’s Crypto Industry Innovators 30 Index, which tracks top firms “engaged in actual, material activity in the crypto sector” that hold a minimum of “$100 million of liquid crypto assets on their balance sheet.”

A Wednesday announcement notes that most companies included in the index derive “at least 75% of their revenue from directly servicing cryptocurrency markets or have at least 75% of their net assets accounted for by direct holding of liquid crypto assets.”

Hunter Horsley, CEO of Bitwise, noted that the absence of regulated financial products offering exposure to Bitcoin (BTC) in the United States has resulted in many investors missing the “stellar cryptocurrency returns” produced during rallies of recent years.

“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.”

Inspired by Coinbase’s direct listing on the Nasdaq last month, Bitwise’s index recognizes crypto firms within 24 hours after they debut through an initial public offering or direct listing. 

While BITQ may be the first ETF to have “crypto” in its title, it is not the first ETF offering exposure to the crypto sector’s leading firms. The crypto-heavy portfolio of the Amplify Transformational Data Sharing ETF (BLOK) has seen it rank among the 50 top-performing ETFs of 2021 so far when excluding leveraged and inverse products with a year-to-date gain of 36.4%.

While BLOK’s ticker is at best an oblique reference to blockchain, nearly every company allocation in its portfolio has direct connections to the crypto and digital asset sector. Its 10 largest positions — representing 41% of assets under management — include industry leaders MicroStrategy (MSTR), Square (SQ), Galaxy Digital Holdings (GLXY) and Marathon Digital Holdings (MARA).

BLOK is the single-largest holder of MicroStrategy by percentage allocation with 8% of its capital invested and the largest MARA holder by number of shares held.