As for cryptocurrency markets down more than 50% this year, 21Shares is attempting to imitate the 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 (ETPs) that provide investors with exposure to the largest cryptocurrencies, Bitcoin and Ether, while also attempting to reduce volatility by rebalancing assets to the US dollar.
On July 20, the new 21Shares S&P Risk Controlled Bitcoin Index ETP and 21Shares S&P Risk Controlled Ethereum Index ETP will begin trading on the Swiss SIX Exchange. According to the firm, the ETPs will trade under the tickers SPBTC and SPETH.
Both ETPs aim for the volatility of 40%, which they achieve by dynamically rebalancing or allocating more assets to USD when volatility rises. The products seek to replicate the benchmarks of S&P indices, which control risk by adjusting exposure to the underlying index and allocating to US dollars dynamically.
Arthur Krause, Director of ETP Product at 21Shares, highlighted that the 40% target refers to uncertainty rather than investment performance. Krause told Cointelegraph that large-cap equities in the United States had exhibited annual historical volatility of 20%. This figure was 70% for Bitcoin and 80% for Ether, he said, adding:
"The 21Shares S&P Risk Control Index ETPs combine exposure to a volatile cryptocurrency with cash — which has zero volatility — to attempt to achieve the overall target of moderate volatility."
According to Sharon Liebowitz, senior director of innovation at S&P Dow Jones Indices, the company has been actively involved in cryptocurrency in recent years. Last year, S&P launched a cryptocurrency index to track the performance of the cryptocurrency market. Liebowitz mentioned SPBTC and SPETH as indices that aim to address volatility associated with underlying cryptocurrencies.
The new ETPs complement 21Shares' bear market-focused Crypto Winter Suite offering. Amid the market sell-off, 21Shares launched the investment offering in June with the goal of providing investment products specifically designed for low-cost exposure to cryptocurrency.
The Crypto Winter Suite is aimed at both retail and institutional investors in countries such as France, Germany, Switzerland, Austria, Sweden, the Netherlands, and Australia.
Regardless of the current bear market, 21Shares has seen an increase in inflows to its platform, recently surpassing $100 billion in new assets under management (AUM) year to date.
"While our AUM is currently down due to market conditions, our inflows are at an all-time high," Krause said, adding that 21Shares' AUM is currently $1 billion. "Investors are holding strong and continuing to create inflows for the long game," he said. Investors who believe in cryptocurrency are "buying the dip," particularly through ETPs as a transparent, convenient, and safe way to enter the asset class."
As per Grayscale Investments, if previous cycles repeat themselves, the current bear market could last another 250 days beginning in July 2022.