Ethereum is the largest and most established decentralized supercomputer, according to Bitwise Asset Management. It provides the core infrastructure for most decentralized finance applications, nonfungible tokens, and stablecoins. However, we are in the early days of potential Ethereum exposure for ETF-oriented advisors and investors. “We’re entering the ETF era for crypto,” explained Matt Hougan, chief investment officer for Bitwise Asset Management, at the New York Stock Exchange.
“Bitwise now has bitcoin-linked products, Ethereum-linked products, and blended products. We’re on the pathway to a spot product,” he added. “There are many advisors interested in investing in futures-based products ahead of a spot ETF approval. Crypto coming into ETFs is a signal we’re going mainstream as an asset class.“
Bitwise’s Growing Crypto ETF Lineup
The Bitwise Ethereum Strategy ETF (AETH) and the Bitwise Bitcoin and Ether Equal Weight Strategy ETF (BTOP) began trading in October 2023. They joined the Bitwise Bitcoin Strategy Optimum Roll ETF (BITC) that launched in March 2023. In the six-month period ended October 26, BITC was up 18%, outperforming the S&P 500 Index’s approximate 2% gain.
Bitwise is one of a dozen asset managers seeking to launch a spot bitcoin ETF in the U.S. or convert a different structure into one. The SEC has prevented such ETFs from coming to market for years on concerns about fraud and manipulation. However, we think the regulatory environment has shifted. There is a strong likelihood that multiple products will be trading by the beginning of the Exchange conference in February 2024.
“Ethereum now has billions in revenue, millions of users, and thousands of distinct apps and developers,” said Bitwise CEO Hunter Horsley. “Blue-chip brands like Nike, Starbucks, Adidas, Pepsi, PayPal, JPMorgan, and others are using applications on Ethereum.”
Educating ETF Investors About Crypto
Horsley and Hougan were joined by other Bitwise executives, as well as investors and VettaFi, at an NYSE opening bell ringing ceremony last week celebrating Bitwise’s expanded ETF lineup. However, this is only part of its efforts to educate investors about the opportunities of using ETFs to gain access to cryptocurrency’s strong performance.
VettaFi hosted a mid-October webcast with Bitwise titled, “How Futures Are Changing Crypto.” We asked advisor attendees about their time frame for allocating new capital to crypto. Approximately 30% said they planned to allocate to the asset class in less than 12 months. Another 24% said in more than 12 months. The remaining respondents said they had no intent to allocate. We view that constructively, as people are learning more about the asset class.
Hougan noted crypto is the best-performing asset class this year, the last three years, last five years, and the last 10 years. In addition, Ethereum has had a very low correlation to the S&P 500 Index and the Russell 2000 Index, adding to its potential appeal in a diversified portfolio to Hougan.
For some advisors, a small allocation to this burgeoning asset class could be compelling. We believe in the next year, more ETF-oriented advisors and investors will be learning about cryptocurrencies. At the same time, more cryptocurrency investors will learn about ETFs. Education remains paramount.
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