The names of some cryptocurrencies feel ubiquitous but as investments, even bitcoin and Ethereum are still relatively esoteric. The reason, in part, is because most wealth managers — the companies that collectively manage trillions of dollars in assets — forbid their financial advisors from recommending cryptocurrencies.
Offering cryptocurrencies comes with logistical challenges, too. Only in October did a company called Two Ocean Trust become the first “qualified custodian” in the U.S. by a state or federal banking regulator, approving it to service traditional assets and cryptocurrencies alike. Thousands of wealth managers use more than one custodian and if they are willing to add another, they could connect and advise clients on the new asset class and charge a fee based on the value of those assets under their management.
Now, for the first time, advisors can allocate money to cryptocurrencies without having to seek a special custodian.
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On Wednesday, Bitwise Asset Management, a San Francisco-based cryptocurrency index and beta funds company that manages more than $100 million in assets, announced that its Bitwise 10 Crypto Index Fund (BITW) had been listed on OTC Markets Group’s OTCQX exchange. It’s the first cryptocurrency index fund to be publicly traded. The exchange is also home to the Grayscale Bitcoin Trust (GBTC), a fund with shares that track the price for only bitcoin.
In its debut today, the Bitwise 10 Crypto Index Fund fell to as low as $20.75 and traded as high as $31 before closing 15% higher at $29.95. “We had a great first day of trading, with $11.9 million traded and tight spreads throughout the day,” Matt Hougan, chief investment officer at Bitwise, told RIA Intel.
The listing is an important milestone for Bitwise, which has sought to Bogle-ize cryptocurrencies since it was founded in 2017.
The Bitwise 10 Crypto Index Fund is a diversified, market-cap-weighted index of the 10 largest cryptocurrencies, which were also chosen based on liquidity, custody, and other risks. The basket represents approximately 80% of the market and as of Nov. 30, the fund held approximately 75% bitcoin, 13% Ethereum, and 12% allocated across XRP, Litecoin, Chainlink, Tezos, and others. The fund debuted with approximately $120 million in assets under management and will be rebalanced monthly.
Bitwise COO Teddy Fusaro, who was previously Senior Vice President of New York Life Investment Management, oversees the fund’s management Portfolio management.
From the start of the year through Nov. 30, the fund was up 184%, outperforming a stand-alone position in bitcoin, according to Bitwise.
"Crypto is the best-performing asset class in the world this year, and the outlook for 2021 is strong. The start of public trading for shares of BITW will make it significantly easier for financial advisers, family offices, individuals, and institutional funds to allocate to the space. We believe the Fund offers a robust, one-stop solution," Hougan said in a statement about the listing.
The fund structure is a Delaware statutory trust and audited annually. The cryptocurrencies are held in 100% cold storage with a regulated, insured custodian, according to Bitwise.
Michael Thrasher (@Mike_Thrasher) is a reporter at RIA Intel based in New York City.