With cryptocurrency markets shrinking over 50% this year, 21Shares are working to replicate S&P Dow Jones Indices’ benchmarks with its new risk-adjusted crypto investment products.
The Swiss crypto investment firm 21Shares has launched two new exchange traded products (ETP) offering investors exposure to the largest cryptocurrencies — Bitcoin (BTC) and Ether (ETH) — while aiming to soften volatility via rebalancing assets to the U.S. dollar (USD).
The new products, the 21Shares S&P Risk Controlled Bitcoin Index ETP and 21Shares S&P Risk Controlled Ethereum Index ETP, will start trading on the Swiss SIX Exchange on July 20. The ETPs will trade under tickers SPBTC and SPETH, the firm announced on Wednesday.
Both ETPs target a volatility level of 40%, which is achieved through dynamically rebalancing, or allocating more assets to USD when volatility rises. The products seek to replicate S&P indices’ benchmarks that control risk by adjusting the exposure to the underlying index and dynamically allocating to U.S. dollars.
21Shares’ Director of ETP Product Arthur Krause emphasized that the 40% target refers to volatility rather than investment performance. In a statement to Cointelegraph, Krause noted that large-cap equities in the United States demonstrated annual historical volatility of 20%. For Bitcoin, this figure stood at 70%, while Ether’s volatility amounted to 80%, he said, adding:
“The 21Shares S&P Risk Controlled Index ETPs combine exposure to a volatile cryptocurrency with cash — which has zero volatility — to attempt to achieve the overall target of moderate volatility.”
Sharon Liebowitz, senior director of innovation at S&P Dow Jones Indices, mentioned that the firm has been actively involved in crypto in recent years. Last year, S&P launched a cryptocurrency index tracking crypto market performance. SPBTC and SPETH are examples of indices aiming to address volatility associated with underlying cryptocurrencies, Liebowitz noted.
The new ETPs join the 21Shares’ bear market-focused offering known as Crypto Winter Suite. 21Shares launched the investment offering in June, aiming to provide investment products specifically designed for low-cost exposure to crypto amid the market sell-off.
Just like other crypto ETPs by 21Shares, the Crypto Winter Suite targets both retail and institutional investors in countries like France, Germany, Switzerland, Austria, Sweden, Netherlands and Australia.
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Despite the ongoing bear market, 21Shares has seen an influx in inflows on its platform, recently hitting $100 billion in new assets under management (AUM) year-to-date. “While our AUM is down now due to the market conditions, our inflows are at an all-time high,” Krause said, adding that 21Shares currently has $1 billion in AUM. He added:
“Investors are holding strong and still creating inflows for the long game. Investors who believe in crypto are ‘buying-the-dip” — and particularly via ETPs as a transparent, convenient and safe way to enter the asset class.”
According to Grayscale Investments, the current bear market could last another 250 days from July 2022 if the duration of previous cycles repeats itself.