Ben Strack

After a bitcoin rally brought the asset’s price above $35,000 late Monday, trading volumes for the first and largest US bitcoin futures fund soared Tuesday.&nbsp;&nbsp;&nbsp;



The ProShares Bitcoin Strategy ETF (BITO) — the first US fund to hold bitcoin futures contracts — saw volumes amounting to 21.1 million shares on Monday, up from its average volumes of about 8 million shares.&nbsp;



That number rose Tuesday, as 32.5 million shares of BITO had traded as of 2:30 pm ET, according to Nasdaq data. BITO’s price was $17.20 at that time, making the volumes’ value worth roughly $557 million on the day so far.&nbsp;



The ETF’s Tuesday volumes were poised to easily surpass the 33.5 million shares traded on Oct. 16. That day, bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) quickly jumped from about $28,000 to $30,000 <a href="https://blockworks.co/news/btc-price-spot-bitcoin-etf">after an erroneous media report</a> suggested the US Securities and Exchange Commission had approved BlackRock’s spot bitcoin ETF. 



The volumes seen during those two days in October are the most since Aug. 29. The ETF saw volumes of 58.3 million shares that day — reflecting optimism after <a href="https://blockworks.co/news/grayscale-sec-spot-bitcoin-etf">Grayscale Investments’ court victory against the SEC</a>.&nbsp;&nbsp;



The high volumes early this week coincide with a bitcoin rally that appears to be in part spurred by optimism of spot bitcoin ETF approval.&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-etf-price-rally">Is bitcoin’s ETF-fueled rally to $35K premature? Well, maybe</a>



Fund issuers have been updating bitcoin ETF applications in recent weeks — moves industry watchers say signal continued dialogue with the SEC. Grayscale said Monday the firm intends “to move as expeditiously as possible” in its quest to convert its Bitcoin Trust (GBTC) to an ETF after <a href="https://blockworks.co/news/grayscale-sec-gbtc-etf">the court formalized its legal victory</a> over the regulator.&nbsp;



Additionally, BlackRock’s planned iShares Bitcoin Trust (IBTC) was <a href="https://blockworks.co/news/blackrock-ishares-bitcoin-etf">listed on the Depository Trust and Clearing Corporation (DTCC) website</a> Monday before <a href="https://blockworks.co/news/blackrock-ibtc-bitcoin-etf">being taken off the list Tuesday</a>.&nbsp;



Gabor Gurbacs, director of digital assets strategy at fund group VanEck, said in a Tuesday X <a href="https://twitter.com/gaborgurbacs/status/1716851557038272931">post</a> that he doesn’t view the removal of IBTC from the DTCC website as bearish.



“Things are chugging along with arguably increased momentum,” he wrote. “Discussions happening. Questions are answered. Problems are being solved. To me it&#8217;s all directionally good news and the right type of industry and regulatory collaboration.”



Other bitcoin-linked ETFs saw increased interest amid the rally, with Volatility Shares’ 2x Bitcoin Strategy ETF (BITX) notching Tuesday volumes of more than 800,000 shares as of 2:30 pm ET, Nasdaq data shows.&nbsp;



BITX volumes have reached 1 million shares just three times <a href="https://blockworks.co/news/leveraged-btc-futures-etf-debut">since its June launch</a>, including on Oct. 16.



Volumes for the ProShares Short Bitcoin Strategy ETF (BITI) also spiked Tuesday, reaching 4 million shares with a couple hours left before market close — its highest level since Aug. 29.&nbsp;



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BITO volumes soar Tuesday in midst of BTC price rally

Darren Kleine

Old financial news headlines once bandied about descriptions of ETFs as “financial weapons of mass destruction” that threatened to annihilate the very fabric of American capitalism, Matt Hougan says.



“There were congressional hearings, literally about ETFs destroying American entrepreneurialism and ending the American dream,” the Bitwise CIO says.&nbsp;



Before the advent of ETFs, Hougan explains on the Empire podcast (<a href="https://open.spotify.com/episode/2xLI27RTiLgo1TGN6tBehR">Spotify</a>/<a href="https://podcasts.apple.com/us/podcast/how-etfs-will-change-crypto-matt-hougan-hunter-horsley/id1554930038?i=1000632428945">Apple</a>), people mostly invested through mutual funds, allowing them access to the market just once a day.



This created a “shared collective experience of taxation,” Hougan explains. If an individual sold their mutual funds, all the remaining investors effectively paid taxes on the sale.&nbsp;



“This is a ridiculous idea, but this was the best technology they could develop in 1920.” Nothing improved upon it until the 1990’s, he says, when the ETF was created.&nbsp;



<h2 class="wp-block-heading">Disrupting the establishment</h2>



Problematically, many massive companies had flourished from the enormous successes of mutual funds and traditional bonds trading — “and an <a href="https://blockworks.co/tag/etf">ETF</a> threatened all that,” Hougan says. In response to the perceived danger, visions of a “liquidity doom loop” that would implode the broader economy reverberated across financial media channels for years.



<a href="https://blockworks.co/tag/matt-hougan">Hougan</a> explains that the establishment deeply feared the new financial mechanism for two reasons. “One,” he says, “it was so disruptive because it was going to slash margins and profits and prices.”



“Two, because it was new and people didn&#8217;t know exactly how it would turn out.”



People remained skeptical about ETFs, not just for a year or two, but for more than 20 years, Hougan says. Headlines as recent as <a href="https://seekingalpha.com/article/4180604-what-to-when-etfs-become-weapons-of-mass-destruction">2018</a> echoed the same fearful message of disaster wrought upon hapless Americans by the menacing financial instruments.



The chief investment officer of Bitwise sees the same behavior <a href="https://blockworks.co/news/congress-crypto-back-in-session">taking place in Congress today</a> with the crypto industry. “We see congresspeople asking ridiculous questions and talking about Bitcom and mispronouncing names. All of that is a replay to me of what we saw.”



Fortunately, it turns out that the financial doomsdayers of yesteryear were wrong. “An ETF is an evolution in financial technology,” Hougan explains. Fast forward to today and ETFs are now “the mother&#8217;s milk of investing,” he says. “It&#8217;s how literally almost every American gets access to the market today.”



“It&#8217;s a $7 trillion industry. No one questions it. Every major company has come on board. I think we&#8217;re going to go through the same journey on crypto.”



Skepticism and fear regarding the crypto industry is beginning to turn, Hougan says, <a href="https://blockworks.co/news/blackrock-barclays-jpmorgan-chase-dapp-tcn">with larger institutions like BlackRock</a> and Invesco getting involved. “In two or three years, there&#8217;ll be no more congressional hearings. People will be just talking about how much more efficient this made the market.”



Read more: <a href="https://blockworks.co/news/invesco-spot-ether-etf-galaxy-digital-bitcoin">Invesco, Galaxy float latest spot ether ETF proposal</a>



“History always repeats — and it&#8217;s repeating with crypto.”



The market has reached a point where it’s now ready for a spot bitcoin ETF, Hougan says. “You can surveil the CME bitcoin futures market. Firms like BlackRock are looking for surveillance sharing agreements with <a href="https://blockworks.co/tag/coinbase">Coinbase</a>.”



<iframe loading="lazy" frameborder="0" height="200" scrolling="no" src="https://playlist.megaphone.fm/?e=BWG9520472747" width="100%"></iframe>







“This market is just much more institutional than it was in 2013 or honestly, even when we <a href="https://blockworks.co/news/0xresearch-bitwise-spot-bitcoin-etf">started pushing for a spot bitcoin ETF</a>,” he says, “which was back in 2018 and 2019.”



“The market has come a long way and I think those manipulation concerns are now solved,” he says. 



“We&#8217;ll see <a href="https://blockworks.co/news/sec-grayscale-spot-bitcoin-etf">if the [US Securities and Exchange Commission] agrees</a> in the coming months.”



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Crypto ETF skepticism echoes past fears of ETFs themselves: Bitwise CIO

ProShares launched three ether futures ETFs earlier this month. Now, the firm is preparing to offer something a bit different.&nbsp;



The fund group’s Short Ether Strategy ETF (SETH) appears set to start trading in the coming days, about two weeks after the first ether futures ETFs arrived on the market.



To be listed on the NYSE Arca exchange, SETH seeks daily investment results that correspond to the inverse of the daily performance of the S&amp;P CME Ether Futures Index, according to a Friday <a href="https://www.sec.gov/ix?doc=/Archives/edgar/data/1174610/000168386323007155/f36559d1.htm#xx_560c15e8-e634-4d86-9ddd-2577e8d99eb8_2">filing</a>.&nbsp;



The fund does not directly short ether (<a href="https://blockworks.co/price/eth">ETH</a>). Instead, it aims to benefit from decreases in the asset’s price, the prospectus notes.



The price of ETH was about $1,540 at 4 pm ET on Friday — down roughly 6% from seven days ago.&nbsp;&nbsp;



<a href="https://blockworks.co/tag/proshares">ProShares</a> expects the registration statement for SETH “to go effective” on Oct. 15 and intends to launch the fund in early November, a source familiar with the filing told Blockworks.



The three existing ProShares ether futures funds — including two that invest in both ether and bitcoin futures contracts — <a href="https://blockworks.co/news/ether-futures-etfs-vaneck-proshares-bitwise-offerings">debuted on Oct. 2</a> alongside similar products by VanEck and Bitwise.



Read more: <a href="https://blockworks.co/news/ether-futures-etfs-opening-week-underwhelming">Underwhelming: week-one demand stays soft for ETH futures ETFs</a>&nbsp;



<a href="https://blockworks.co/news/sec-consider-ether-futures-etfs">The US Securities and Exchange Commission greenlit ether futures ETFs</a> two years after the first bitcoin futures ETF — the ProShares Bitcoin Strategy ETF (BITO) — came to market in October 2021.&nbsp;



ProShares followed up its bitcoin futures ETF launch with that of its Short Bitcoin Strategy ETF (BITI) in June 2022. BITO and BITI have about $850 million and $75 million in assets, respectively.



Updated Oct. 13, 2023 at 5:21 pm ET: Modified for additional context. 



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ProShares preps short ether futures ETF for trading

A day after Valkyrie Investments became the first to offer ether futures exposure in an ETF, the crypto-focused firm is getting rid of those holdings.



At least for now.&nbsp;



The Valkyrie Bitcoin Strategy ETF (BTF) will not purchase ether futures contracts “until the effectiveness of an amendment to the fund’s registration statement contemplat[es] the addition of ether futures contracts to the principal investment strategy of the fund,” Valkyrie said in a Friday filing. 



“Until such time, the fund will unwind any existing positions in ether futures contracts,” the <a href="https://www.sec.gov/Archives/edgar/data/1877493/000138713123011727/valkyrie-497_092923.htm">disclosure</a> adds.&nbsp;



A Valkyrie spokesperson did not immediately return a request for comment.&nbsp;



Valkyrie had filed with the US Securities and Exchange Commission in August <a href="https://blockworks.co/news/valkyrie-eth-futures-etf">to change the investment strategy of its bitcoin futures ETF</a> to one that also allows it to invest in ether futures.&nbsp;



A firm representative told Blockworks Thursday that <a href="https://blockworks.co/news/ether-futures-etfs-launch-soon">BTF began adding exposure to ether futures contracts</a>, noting that the new investment strategy was set to become formally effective on Oct. 3. The fund is set to be renamed the Valkyrie Bitcoin and Ether Strategy ETF that day.



Bloomberg Intelligence analyst James Seyffart said in an X <a href="https://twitter.com/JSeyff/status/1707754634033476073">post</a> Friday that Valkyrie’s latest filing could indicate that the SEC asked the firm to reverse its ETH futures positions until the official effective date as competitors also prepare ETFs with such exposures.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;



“The SEC does not want to be a kingmaker via their policies and will do whatever they can to prevent someone from launching on their own like BITO in 2021,” Seyffart added in a separate X post.&nbsp;



The <a href="https://blockworks.co/tag/sec">SEC</a> did not immediately return a request for comment.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">As we&#39;re watching things now: <a href="https://t.co/qQTvrOGX5R">https://t.co/qQTvrOGX5R</a>&mdash; James Seyffart (@JSeyff) <a href="https://twitter.com/JSeyff/status/1707763519708369266?ref_src=twsrc%5Etfw">September 29, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Seyffart is referring to the ProShares Bitcoin Strategy ETF (BITO) — the first bitcoin futures fund to launch in the US, which hit the market in October 2021. Though similar products by Valkyrie and VanEck launched in the following days, BITO gained the lion’s share of assets into these types of funds, <a href="https://blockworks.co/news/bito-on-track-to-be-first-fund-in-history-to-hit-1b-in-aum-in-two-days">quickly amassing $1 billion</a> in assets under management.&nbsp;



VanEck, ProShares and Bitwise have submitted updated prospectuses over the last 24 hours for their own ETFs that invest in ether futures contracts — with expense ratios ranging from 66 basis points to 95 basis points. Bloomberg Intelligence analysts said they expect these funds could go live as soon as Monday.&nbsp;



VanEck posted a <a href="https://twitter.com/vaneck_us/status/1707419473337033075?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1707419473337033075%7Ctwgr%5E2944f8bab5605f486fa8429b85307f1b9a9ee0c9%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fblockworks.co%2Fnews%2Fether-futures-etfs-launch-soon">video</a> on its X page Thursday — in tandem with a press release — teasing the “upcoming launch” of the VanEck Ethereum Strategy ETF. The company declined to comment further.&nbsp;



Volatility Shares, which kicked off the latest wave of ether futures ETF filings in July, said last month it planned to launch its Ether Strategy ETF (ETHU) on Oct. 12. Its website continues to show that date. A representative for the firm did not immediately comment.&nbsp;&nbsp;



Spokespeople for Bitwise and ProShares declined to comment.



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Valkyrie ETF to ‘unwind’ ETH futures position — at least for now

Hope springs eternal. Or at least a few years. Maybe a decade or two?



It’s been a decade since the first ever spot bitcoin ETF application. After yet another series of spot bitcoin ETF decision delays by the US Securities and Exchange Commission, the question persists: where should a crypto-focused investor allocate funds in the event that an ETF does — some glorious day — actually earn approval?



In lieu of an SEC-blessed spot bitcoin ETF, the industry offers numerous avenues for crypto exposure right now: mining companies, venture funds, traditional stocks in companies like Coinbase and MicroStrategy, Grayscale Bitcoin Trust shares (GBTC), and of course, actual “physical” crypto held in storage — hopefully, cold.&nbsp;



Read more: <a href="https://blockworks.co/news/sec-delay-decision-bitcoin-etf-blackrock">Delays mount: SEC defers ruling on BlackRock, Fidelity bitcoin ETFs</a>



So would the approval of a vaunted ETF really change the space all that much? Or is it nothing more than crypto’s MacGuffin, artificially pushing the plot forward with bitcoin’s orange glow emanating from a regulatory briefcase?



For institutions with billions of dollars to move around, things would definitely change for the better, says Jason Yanowitz on the Empire podcast (<a href="https://open.spotify.com/episode/2oPsCyBKOSDPMgOqDF0FkC?si=qf08D7LnTTGhvTIzf0XL7w">Spotify</a>/<a href="https://podcasts.apple.com/us/podcast/grayscale-etf-triumph-uniswap-case-dismissal-and-10/id1554930038?i=1000626445036">Apple</a>). “Let&#8217;s say you&#8217;re trying to deploy $2 billion into bitcoin,” he says, “it&#8217;s very tough to do that.”



“You have to get a <a href="https://blockworks.co/news/dubai-based-otc-crypto-exchange-attracts-sanctioned-traders-report">crypto native OTC desk</a> and implement it like that. The ETF is going to bring enhanced liquidity. It&#8217;s going to reduce the need for physical holdings,” he says.



In the same way that people don&#8217;t want to physically hold gold, slipping precious metal bars under their beds, people don&#8217;t want the responsibility of holding their own bitcoin, Yanowitz says. “They don&#8217;t want to deal with that.”&nbsp;



On top of the secure custody advantages, an ETF offers increased price transparency and discovery, “which institutions want,” he says.



For individual investors, an ETF provides a wider array of investment strategies. However, this might come at the cost of forgoing certain offerings that have previously acted as proxies.



“Historically,” long-time crypto investor Santiago R. Santos says, “investors have allocated to the industry by investing in venture funds, hedge funds and Grayscale products.”&nbsp;



Santos says a spot bitcoin ETF will likely have a negative impact on large scale funds and entities like Grayscale, <a href="https://blockworks.co/news/judges-grayscale-sec-ruling">if it fails to convert to an ETF</a>. With Grayscale’s current GBTC trust, “the fees are very, very high,” Santos says. “It’s charging a one percent fee or so, whereas an ETF charges basis points,” which are “an order of magnitude less.”



“Crypto natives historically have allocated to Grayscale products through a tax advantage account, like a Roth IRA,” Santos says. With an ETF, he says, “that also becomes a possibility, which is fairly advantageous.”



An ETF offers investors enhanced access and exposure to bitcoin. It introduces a number of strategies with options markets, and facilitates the ability to borrow “in a cost-efficient manner,” he says.



<h2 class="wp-block-heading">This time isn’t different</h2>



Santos then asks Yanowitz, “if you had a hundred dollars to invest from scratch,” with all the options available today and ETFs to boot, “how would you allocate that hundred dollars?”



“I’m buying bitcoin and <a href="https://blockworks.co/tag/coinbase">Coinbase</a>, probably. Those are my two,” he replies, choosing to invest in something he can buy and “forget about” for ten years. “Why buy the ETF when you could buy the underlying [asset]?” he asks.



Santos answers the rhetorical question, reminding Yanowitz that an ETF offers Roth IRA possibilities, which is impossible with physical bitcoin. But such a strategy might require an investor to “max out their allocation” to achieve similar results, Yanowitz replies.



“The most dangerous thing in crypto from an allocating perspective,” Yanowitz says, “is thinking that this time will be different. And if you look at all the last cycles, bitcoin leads.”



<iframe loading="lazy" frameborder="0" height="200" scrolling="no" src="https://playlist.megaphone.fm/?e=BWG9512845548" width="100%"></iframe>







“Bitcoin leads, that capital flows into <a href="https://blockworks.co/tag/ethereum">ETH</a>, that excess capital in ETH flows into —  in 2017 it was ICOs, in 2020 it was <a href="https://blockworks.co/tag/defi">DeFi</a>, in 2021 it was <a href="https://blockworks.co/tag/nfts">NFTs</a> — that keeps pushing out on the risk spectrum until the cycle is over.”



With a potential spot bitcoin ETF next year alongside <a href="https://blockworks.co/news/bitcoin-halving-a-year-out">the halving</a>, a presidential election and continued pressures to “<a href="https://blockworks.co/newsletter/issue/32052120">turn the money printer back on</a>,” Yanowitz concludes, it’s “tough to be bearish Bitcoin right now.”&nbsp;



Despite the years of delays, the crypto faithful remain hopeful — and the convoluted plot continues.



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Will investor behavior change once an ETF is approved?

Sebastian Sinclair

<div id="highlights-block_62fc7b40c1559" class="highlights">
 <ul>
 <li>Monochrome hopes to seperate itself from other crypto ETF managers by flaunting a different kind of license</li>
 <li>The firm&#8217;s ETFs will track the underlying spot prices of bitcoin and ether, pending approval</li>
 </ul>
 
</div>



Bitcoin-focused asset management firm Monochrome wants to add more exchange-traded funds (ETFs) the already crowded list of Australian crypto spot vehicles.



Monochrome said Tuesday its partner Vasco Trustees has received a financial license to operate crypto spot ETFs in the country, paving the way for an official listing on the Australian Securities Exchange (ASX).



Monochrome is hoping its trustee&#8217;s fresh Australian Financial Services accreditation (AFS) — obtained via the country&#8217;s securities regulator — will help separate itself from the growing pack of crypto exchange-listed products Down Under.



&#8220;We see choice being a good thing for investors, particularly when dealing in the regulated space, as not all offerings are equal,&#8221; Jeff Yew, Monochrome&#8217;s CEO, told Blockworks in an interview.



The Australian Securities and Investments Commission (ASIC) granted trustee Vasco its approval Tuesday. Monochrome is looking to list bitcoin and ether ETFs under tickers IBTC and IETH, &#8220;in due course.&#8221;



Yew told Blockworks that Monochrome had worked closely with Vasco to upgrade its AFS license in order to accommodate a <a href="https://asic.gov.au/regulatory-resources/digital-transformation/crypto-assets/#:~:text=managed%20investment%20scheme%3F-,Australian%20laws%20apply,as%20a%20responsible%20entity%2C%20and" target="_blank" rel="noreferrer noopener">crypto-asset authorization</a> on its <a href="https://asic.gov.au/for-finance-professionals/fund-operators/running-a-registered-scheme/" target="_blank" rel="noreferrer noopener">financial services license</a>.



Other Australian crypto ETFs indirectly hold the crypto-assets and operate under the general financial asset authorization, Yew said, adding that Monochrome&#8217;s ETF offering will directly hold the underlying crypto-assets and is specifically authorized to do so.



To date, no crypto ETFs operate under an AFS license with crypto-asset authorization, Monochrome said in a <a href="https://monochrome.co/article/monochrome-drives-investor-engagement-with-breakthrough-crypto-asset-licence-variation/" target="_blank" rel="noreferrer noopener">blog post</a>. Domestic crypto exchange <a href="https://cms.blockworks.co/btc-markets-gets-financial-services-license-in-australian-first/" target="_blank" rel="noreferrer noopener">BTC Markets</a> became the country&#8217;s first crypto firm to receive an AFS license in June.



It was a sign to investors that Australia may be fast becoming a central hub for trading digital assets, especially considering the US is yet to approve any spot crypto ETF applications.



<h3 class="wp-block-heading">Australian crypto ETFs yet to see significant interest</h3>



As for Monochrome&#8217;s bid, Yew said the company has lodged an ETF application with the ASX but the approval process will take some time.



In any case, several similar crypto funds are already listed in the country via CBOE Australia, but they&#8217;ve moved slowly out the gate following their debut. 



21Shares&#8217; bitcoin and ether ETFs both <a href="https://cms.blockworks.co/first-spot-crypto-etfs-in-australia-underwhelm-traders-amid-market-downturn/" target="_blank" rel="noreferrer noopener">underwhelmed</a> on the first day&#8217;s trading while a decline in overall market activity in recent months has impacted sentiment.



<a href="https://cms.blockworks.co/betashares-launches-australias-first-metaverse-etf-on-asx/" target="_blank" rel="noreferrer noopener">BetaShares Metaverse</a> ETF, <a href="https://cms.blockworks.co/3iq-latest-crypto-etf-fund-manager-to-join-australian-market/" target="_blank" rel="noreferrer noopener">3iQ CoinShares&#8217; Bitcoin Feeder</a> ETF and <a href="https://cms.blockworks.co/cboe-australia-lists-cosmos-physically-settled-ether-etf-amid-market-woes/" target="_blank" rel="noreferrer noopener">Cosmos Purpose Ethereum Access</a> ETF have also performed worse than previously anticipated, ASX data shows.



Yew told Blockworks Monochrome was aware of the &#8220;relatively lackluster&#8221; performance of the funds but remained steadfast. He reasoned that Monochrome is looking long-term by building rails for retail and professional investors to access the nascent digital asset sector.



&#8220;Having personally ridden multiple market cycles since 2013, bear markets are the best time to build vital infrastructure, away from the froth and FOMO that accompanies the heights of bull markets,&#8221; Yew said.



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Monochrome After Spot in Crowded Australian Crypto ETF Market

<div id="highlights-block_62c4712f8f69d" class="highlights">
 <ul>
 <li>21Shares has seen small outflows despite recent losses, firm’s director of ETP product told Blockworks</li>
 <li>Seven of the 15 worst-performing US ETFs in June were crypto-related funds</li>
 </ul>
 
</div>



The worst-performing European ETPs last month were all crypto products, and digital asset-focused ETFs in the US also notched some of the worst returns during the month.&nbsp;



The highest negative returns during the month in Europe went to the 21Shares Aave ETP, which yielded -52.6% in June, according to Morningstar data.



“These are abysmal returns,” ETF.com Senior Analyst Sumit Roy told Blockworks. “As volatile as crypto is, to see 50% declines in one month is truly astounding. It just speaks to how treacherous the current crypto market is.”



The firm’s Bitcoin Cash ETP, Ethereum ETP and Bitcoin Suisse ETP also made the list of top 15 worst-performing ETPs (exchange-traded products) during the month, with returns of -47.5%, -46.5% and -40.5%, respectively.



“As we’ve experienced turbulent markets, we’ve stayed in close communication with our clients and seen very little outflows as investors hold strong for the long-term,” Arthur Krause, 21Shares’ director of ETP product, told Blockworks in an email.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“In fact, we’ve seen inflows as investors buy the dip.”</blockquote>



The 21Shares Bitcoin ETP and Ethereum ETP recorded the biggest inflows in the European market in June, Krause added, with $20 million and $10 million in net new assets, respectively. The company launched the first ETP within its <a href="https://cms.blockworks.co/21shares-vying-to-build-out-crypto-winter-suite/" target="_blank" rel="noreferrer noopener">planned “crypto winter” suite</a> last week in an effort to help investors navigate the challenging market environment.&nbsp;



Crypto ETPs have been among the worst-performing products each month this year, aside from March, Morningstar Investment Specialist Valerio Baselli told Blockworks in an email. The entire crypto ecosystem is under pressure, as evidenced by bitcoin&#8217;s fall to below the $20,000 mark at the end of the month, he added.



Bitcoin’s price was about $19,620 at 12:30 pm ET, according to data compiled by Blockworks — down roughly 0.5% from 24 hours ago and down about 34% from a month ago.



“As usual, the debate is highly polarized,” Baselli said. “Crypto skeptics think this is the moment the bubble bursts and are relishing the daily lurches downwards, while true believers are exhorting other zealots to keep the faith, ride this wobble out, and even add to their holdings.”



June was the worst month since 2011 for bitcoin, Baselli said, noting that the asset — originally thought to be uncorrelated to equity markets — plunged in parallel with US equities. The second quarter of 2022 was the worst since 1970 for the S&amp;P 500, while the Nasdaq recorded its weakest half-year since 1998, he added.



“The asset class is firmly entrenched in a deep bear market, and these returns are a reflection of that,” Roy said. “It&#8217;s a reminder that crypto and crypto ETPs are extremely high risk, with a similar risk profile to speculative tech stocks.”



As for US ETFs, seven of the 15 worst-performing funds in June were crypto funds, according to Morningstar Direct data obtained by Blockworks.



VanEck’s <a href="https://www.vaneck.com/us/en/investments/digital-assets-mining-etf-dam/" target="_blank" rel="noreferrer noopener">Digital Assets Mining ETF</a> (DAM) saw the lowest monthly returns within the category, at -43%. The asset manager’s <a href="https://www.vaneck.com/us/en/investments/digital-transformation-etf-dapp/" target="_blank" rel="noreferrer noopener">Digital Transformation ETF</a> (DAPP) endured a total return of -41% over the span.&nbsp;



Bitcoin futures ETFs saw similar returns, with such products by ProShares, Valkyrie Investments and VanEck also yielding roughly -41%. Global X’s <a href="https://cms.blockworks.co/global-x-offers-different-type-of-bitcoin-futures-etf/" target="_blank" rel="noreferrer noopener">Blockchain and Bitcoin Strategy ETF</a>, which invests in a mix of equity securities of blockchain companies and US-listed bitcoin futures, performed only about a half percentage point better.



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Crypto ETPs Saw ‘Abysmal’ Returns in June

<div id="highlights-block_62b388fe770f9" class="highlights">
 <ul>
 <li>The SEC’s deadlines to rule on spot bitcoin ETF proposals by Bitwise Asset Management and Grayscale Investments fall in the first week of July</li>
 <li>The collapse of LUNA and the ongoing sell-off could impact regulator’s decision on the proposed products, Bitwise CIO Matt Hougan says</li>
 </ul>
 
</div>



As the SEC gets set to rule on two spot bitcoin ETF applications within the next two weeks, the chief investment officer at Bitwise Asset Management said ongoing volatility in crypto markets could impact the regulator’s decision on such products.



Crypto index fund issuer Bitwise, which managed $1.2 billion in assets as of March 31, expects an SEC decision on its proposed spot bitcoin ETF by July 1. 



The regulator has until July 6 to rule on Grayscale Investments’ application to convert its bitcoin trust (GBTC) to an ETF. <a href="https://grayscale.com/products/grayscale-bitcoin-trust/" target="_blank" rel="noreferrer noopener">GBTC</a>, which has $13.3 billion assets under management, <a href="https://ycharts.com/companies/GBTC/discount_or_premium_to_nav" target="_blank" rel="noreferrer noopener">has traded at a discount</a> of about 30% in recent weeks.&nbsp;&nbsp;&nbsp;



No spot bitcoin ETF has ever been approved in the US, and a number of industry watchers <a href="https://cms.blockworks.co/crypto-execs-read-the-tea-leaves-on-spot-bitcoin-etf-approval/" target="_blank" rel="noreferrer noopener">do not expect one to launch</a> until 2023 at the earliest.



Bitwise CIO Matt Hougan told Blockworks that the SEC has historically considered the state of the crypto space more broadly when considering spot bitcoin products.&nbsp;



“While that’s not the technical deciding point on spot bitcoin ETF applications, it’s of course the case that regulators would consider the entire environment when evaluating an application like this,” he said. “Things like the collapse of LUNA is not a great news item for the crypto industry and will probably at least enter into the minds of regulators as they review that.”



But Hougan noted that <a href="https://cms.blockworks.co/proshares-to-launch-first-us-etf-thats-bearish-on-bitcoin/" target="_blank" rel="noreferrer noopener">ProShares’ launch</a> of an ETF betting against bitcoin on Tuesday is a positive signal that the SEC is on a path to eventually approve a spot ETF. The ProShares Short Bitcoin Strategy ETF (BITI) seeks daily investment results that correspond to the inverse of the daily performance of the S&amp;P CME Bitcoin Futures Index.



“That is a sign of the SEC becoming more comfortable with the space and sort of following a crawl-walk-run strategy,” Hougan said. “The question in everyone’s mind is when will they get to the run part.”



A Grayscale spokesperson told Blockworks that the firm is also encouraged by the SEC’s continued acceptance of bitcoin exchange-traded products (ETPs), such as BITI, calling a spot bitcoin ETF “a natural next step.”&nbsp;&nbsp;&nbsp;&nbsp;



Grayscale CEO Michael Sonnenshein said in a Twitter post on Tuesday that regulators have repeatedly shared concerns about the maturity of crypto’s underlying markets and their potential for fraud and manipulation.&nbsp;



“How could one interpret BITI coming to market as anything other than further acknowledgment of bitcoin’s maturity?” the CEO tweeted.



“Bitcoin’s price discovery is supported by not only a healthy two-sided market that underpins multiple long products, but also a derivatives market robust enough to offer short exposure to retail investors.”



SEC Commissioner Hester Peirce said during the Regulator Transparency Project’s June 14 conference on regulating crypto that she is disappointed that “the SEC has not used more proactively the authorities it already has to sensibly regulate crypto.”



Peirce, who has been an outspoken advocate for a spot bitcoin ETF over the past year, added that the agency’s failure to approve one is “puzzling,” noting that the SEC subjects bitcoin-related products to “a more exacting standard” than it applies to other offerings. 



Bitwise’s pending filing is its second attempt to launch a spot bitcoin ETF. The San Francisco-based company had filed for one in 2019, but withdrew its request in January 2020 amid regulatory concerns. Bitwise <a href="https://cms.blockworks.co/bitwise-tries-once-more-for-spot-bitcoin-etp/" target="_blank" rel="noreferrer noopener">refiled last October</a>, including 150 pages of research within the application focused on price discovery in the crypto markets.  



While Sonnenshein has said publicly that Grayscale <a href="https://cms.blockworks.co/grayscale-threatens-legal-action-if-sec-rejects-bitcoin-etf-conversion-bid/">would consider suing the SEC</a> if its proposal to convert GBTC to an ETF was denied, Hougan said Bitwise will likely stick with its research-centric approach.



“The SEC is clearly engaged in this space and they’re asking good questions,” Hougan said. “In the case they disapprove our application, we’ll have to see what the content of that disapproval is and whether there’s a reasonable research pathway to answer it or not.”



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Bitwise CIO: Market Volatility Doesn’t Help Spot Bitcoin ETF Applications

<div id="highlights-block_627cbf3a3c697" class="highlights">
 <ul>
 <li>Franklin Templeton expects to offer crypto products “when the regulatory landscape provides that opportunity,” firm’s head of digital assets says</li>
 <li>The company recently completed fundraising for its first blockchain-focused venture capital fund</li>
 </ul>
 
</div>



Though Franklin Templeton is bullish on crypto as an asset class, the asset manager is seeking more regulatory clarity before offering ETFs focused on the segment.&nbsp;



The San Mateo, California-based company managed roughly $1.45 trillion in assets, as of April 30, and has clients in more than 150 countries.



“Franklin Templeton understands that cryptocurrencies represent various tokenomics of blockchain and distributed ledger technology systems,” Roger Bayston, Franklin’s head of digital assets, told Blockworks.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“We believe they are an asset class that has a great deal of thematic tailwinds as industries begin to unlock the potential of blockchain and new types of digital assets are created.”</blockquote>



The firm has 55 ETFs trading in the US with combined assets of nearly $1.7 billion, according to ETF.com. Bayston said Franklin Templeton is monitoring regulations around ETFs and considering that delivery mechanism for providing clients exposure to important blockchain investment strategies.&nbsp;



Though competing asset managers, such as <a href="https://cms.blockworks.co/blackrock-lists-blockchain-etf-days-after-similar-fidelity-launch/" target="_blank" rel="noreferrer noopener">BlackRock</a> and <a href="https://cms.blockworks.co/fidelity-launches-metaverse-experience-in-tandem-with-new-etfs/" target="_blank" rel="noreferrer noopener">Fidelity</a>, recently launched ETFs focused on blockchain technologies, Franklin Templeton is still mulling the right time for an entrance.&nbsp;



“We expect to provide quality products when the regulatory landscape provides that opportunity for investors,” Bayston said.



LinkedIn job postings from last week indicate that Franklin Templeton is seeking an investment research analyst to join its crypto asset management team.&nbsp;



The analyst would cover assets such as bitcoin and ether, develop and maintain valuation models and keep executives informed of protocol regulatory, staking and business opportunities, according to the posting. They would also help develop and manage new products in the cryptoasset space.



The firm did not comment on other crypto-related roles that it could seek to fill.&nbsp;



<h3 class="wp-block-heading">Other involvement in crypto</h3>



Franklin Templeton revealed in <a href="https://www.sec.gov/Archives/edgar/data/1882656/000188265621000001/xslFormDX01/primary_doc.xml" target="_blank" rel="noreferrer noopener">a regulatory filing</a> in September that it was <a href="https://cms.blockworks.co/franklin-templeton-prepping-blockchain-fund/" target="_blank" rel="noreferrer noopener">prepping a venture capital fund</a> focused on the blockchain space. The document indicated that the firm had so far raised $10 million for the fund and was looking to raise an additional $10 million before launching.&nbsp;



Bayston confirmed that the company recently completed fundraising for the fund but did not comment about the fund’s specifics, such as its final size.&nbsp;



“Franklin Templeton is active in projects all across the lifecycle of blockchains, ranging from investment activity at the early stages where new protocols and companies building on those protocols are being built, to offering advice on various portfolio constructions of more mature and more widely adopted blockchains,” he said.&nbsp;



The fund group’s parent company <a href="https://www.prnewswire.com/news-releases/eaglebrook-advisors-raises-strategic-capital-from-franklin-templeton-301518638.html" target="_blank" rel="noreferrer noopener">made a strategic investment</a> in crypto separately managed account platform Eaglebrook Advisors in April.



Roger Paradiso, Franklin Templeton’s head of product solutions, said in a statement at the time that the firm would look to bring advised solutions within the asset class to its partner firms, advisors and clients.



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Franklin Templeton Exec: Crypto Asset Class Has ‘Thematic Tailwinds’

<div id="highlights-block_61eb36bba2579" class="highlights">
 <ul>
 <li>The iShares Blockchain and Tech ETF would track the NYSE FactSet Global Blockchain Technologies Index</li>
 <li>BlackRock CEO Larry Fink said in October he sees “huge opportunities” for digital currency</li>
 </ul>
 
</div>



The world’s largest asset manager has an ETF in the works that would focus on blockchain technology.&nbsp;



The filing comes as crypto markets have cratered, with bitcoin dropping 10.8% to $36,900 as of Friday evening. The iShares Blockchain and Tech ETF would track the investment results of the NYSE FactSet Global Blockchain Technologies Index, according to <a href="https://www.sec.gov/Archives/edgar/data/1100663/000119312522014777/d286885d485apos.htm">a Friday regulatory disclosure</a>.



The index consists of companies involved in the development and deployment of crypto technologies in the US and abroad.



The proposed fund plans to invest at least 80% of its assets in stocks included in the index, according to the filing. It may allocate up to 20% in futures, options, swap contracts, cash and cash equivalents — all on equities. The fund will not invest in crypto directly or indirectly via crypto derivatives.&nbsp;



The disclosure did not indicate a ticker or expense ratio for the planned offering.&nbsp;



A spokesperson for the company declined to comment beyond the filing.&nbsp;



Investors have clamored for ETFs with ties to crypto in <a href="https://cms.blockworks.co/when-will-the-sec-approve-a-spot-bitcoin-etf/">the absence of a spot bitcoin ETF</a>. The largest such offering on the market is Amplify Investments’ Transformational Data Sharing ETF (BLOK), which has grown to $1.1 billion of assets since its January 2018 launch.



“iShares filing for a blockchain ETF was inevitable given their focus on mega-trends and that the universe of companies continues to expand,” Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA, said in a Twitter post.&nbsp;



BlackRock has nearly 400 iShares ETFs trading in the US, with combined assets under management of roughly $2.4 trillion. The firm’s total AUM totals about $10 trillion.



The asset manager revealed in January 2021 that its Strategic Income Opportunities Fund (BASIX) and its Global Allocation Fund (MDLOX) <a href="https://cms.blockworks.co/which-mutual-funds-etfs-are-making-crypto-related-investments/">could invest</a> in cash-settled bitcoin futures traded on commodity exchanges registered with the Commodity Futures Trading Commission (CFTC).



CEO Larry Fink <a href="https://cms.blockworks.co/blackrock-ceo-sees-huge-opportunities-in-digital-currency/">told CNBC in October</a> that while he sees “huge opportunities” for digital currency, he is unsure how the crypto space will fare over the long term.&nbsp;



<a href="https://cms.blockworks.co/blackrock-ceo-clients-not-asking-about-crypto/">In a July earnings call,</a> Fink told investors that he believed crypto could one day become an asset class, but long-term investors were not asking the firm about crypto’s fit in their portfolios.



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BlackRock Looks to Enter Crypto ETF Arena With Blockchain Fund

Less than a month after QR Asset Management launched the first exchange-traded fund in Latin America with 100% exposure to bitcoin, the Brazil-based fund group revealed plans to launch an Ethereum ETF, which will also be the region’s first of its kind.&nbsp;



Meanwhile, <a href="https://www.hashdex.com/en/hashdex">Hashdex</a>, also headquartered in Brazil, reportedly plans to bring to market a bitcoin ETF that seeks to neutralize carbon emissions.



The new products come as the Securities and Exchange Commission has delayed its decision on various proposed crypto ETFs in the US. Some industry watchers have told Blockworks they do not expect SEC approval of these types of products until next year.&nbsp;



“I don&#8217;t think launches in Latin America are going to have any impact on the SEC&#8217;s decision-making process,” said Dave Nadig, CIO and director of research for ETF Trends and ETF Database. “If the [European Union] and Canada aren&#8217;t enough pressure, I don&#8217;t think pressure matters, to be honest.”



QR Asset Management’s fund, called QETH11, will be listed on the Brazilian Stock Exchange, also known as B3, according to a Twitter post by QR on Tuesday. The company has not yet announced a release date for the offering.&nbsp;&nbsp;



QR’s QBTC11 fund, which uses CME Group’s bitcoin futures contracts index as a reference, <a href="https://cms.blockworks.co/brazil-bitcoin-etf-follows-similar-launches-in-canada/">launched last month</a>, following several bitcoin ETF launches earlier this year in Canada.



QETH11 is set to follow the CF Ether Reference of the CME, the largest commodity exchange in the world. Felippe Hermes, QR’s editor-in-chief, explained in a July 13 blog post that the growth of the Ethereum network has made cryptocurrency an attractive option for investors looking to gain ground amid the emergence of decentralized finance, which he noted is now a $100 billion sector.



The ETF’s focus on Ethereum, the second-largest cryptocurrency, should guarantee investors an investment thesis different from the “digital gold” Bitcoin, Hermes added.



“In practice, investors who buy Ethereum are betting not on their pre-defined monetary policy, as in Bitcoin, but on the ability to adapt and sustain the growth of a crypto ecosystem, which promotes different solutions to problems in the real economy,” he wrote.



Nadig told Blockworks that once there is a regulatory framework in the US for a bitcoin ETF, an Ethereum ETF would likely not be far behind.&nbsp;&nbsp;



“Ideally I&#8217;d love to see something like a basket approach &#8211; like Bitwise&#8217;s index &#8211; to provide some internal diversification and reconstitution,” he said. “The [rebalancing] part is actually the most difficult thing for most investors or advisors who want crypto access to manage.”



Also set to come to B3 is the Hashdex Nasdaq Bitcoin Reference Price Index Fund (BITH11), which is expected to be listed on the Brazilian stock exchange on Aug. 4.&nbsp;



The upcoming launch comes after the firm launched the <a href="https://hashdex.com/en/hdexbh">Hashdex Nasdaq Crypto Index ETF</a> earlier this year.&nbsp;



“After a semester where the main agenda in the crypto universe was the energy expenditure used in bitcoin mining, we launched the first green ETF in bitcoin,” Hashdex tweeted on Wednesday.



More broadly, products that consider environmental, social, and governance, or ESG, factors have gained steam over the last few years. ESG demand has started to permeate the crypto space, as Guggenheim Investments announced in June it was <a href="https://cms.blockworks.co/guggenheim-creating-listed-esg-friendly-crypto-fund/">creating a fund</a> looking to invest in ESG-friendly crypto businesses.



The Hashdex offering will use part of the management fee to buy carbon credits and offset the carbon produced by the bitcoin held in the ETF, Coindesk reported. Based on calculations by the  <a href="https://www.carbon-ratings.com/">Crypto Carbon Ratings Institute</a>, the fund will adjust its carbon footprint and look to select stocks that will help maintain the environment.



A Hashdex spokesperson did not immediately respond to Blockworks’ request for comment.



Nadig said that carbon neutralization is something the entire crypto ecosystem will continue to wrestle with.&nbsp;&nbsp;



“I get what the various ‘green crypto’ approaches are trying to do,” he added. “I also think there&#8217;s not a lot of rigorous analysis being done of, say, the implied carbon impact of fedwire transfers or cash.”

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