After
much
delay,
spot
bitcoin
exchange-traded
funds
(ETFs)
have
burst
on
the
scene.
BlackRock’s
IBIT
is
now
the
fifth
largest
ETF
(of
all)
by
inflows
this
year,
with
rival
funds
not
far
behind.
It’s
not
yet
clear
whether
this
rate
of
growth
can
keep
pace
and
match
the
bullish
predictions
set
by
firms
like
Standard
Chartered
Bank
and
Fidelity
for
meteoric
end-of-year
ETF
valuations,
but
it
is
obvious
that
bitcoin
ETFs
are
here
to
stay.
The
question
is
how
will
Wall
Street
approach
this
newfound
way
to
gain
bitcoin
exposure,
and
will
regular
investors
want
a
piece
of
the
action?
“We
think
bitcoin
could
be
one
of
the
most
talked
about
brands
on
Wall
Street
in
the
next
decade,”
Mike
Willis,
CEO
and
founder
of
ONEFUND,
said.
“You’re
at
the
beginning
of
the
‘bitcoin
era’
on
Wall
Street.”
Although
remiss
to
offer
a
price
prediction,
Willis
said
he
thinks
bitcoin
could
easily
catch
up
to
gold’s
market
cap.
It’s
an
interesting
prediction
given
ONEFUND’s
strategy
in
launching
its
own
bundle
of
bitcoin
ETFs.
The
independent
index
fund
operation,
most
known
for
its
$106
million
INDEX
ETF
that
tracks
the
S&P
500,
plans
to
launch
a
number
of
“Cyber
Hornet”
funds
that
hold
both
bitcoin
and
traditional
equities
in
a
bid
to
appeal
to
risk
averse
retail
investors.
Most
wealth
managers
will
not
advise
their
clients
to
take
more
than
a
1%-3%
allocation
in
crypto,
Willis
said.
But
even
that
small
recommendation
could
open
up
financial
advisers
to
legal
risks.
“Hardcore
bitcoiners
might
be
used
to
it,
but
90%
of
Wall
Street
and
just
traditional
investors
are
not
used
to
being
down
40%
in
a
given
month.”
“If
I’m
down
40%
for
clients
they’re
burnin
up
my
phone,
if
I’m
down
50%
they’re
out,
if
I’m
down
60%
or
70%
it’s
a
potential
fiduciary
liability
—
a
potential
lawsuit.
Advisers
are
aware
of
that,”
Willis,
who
co-founded
ONEFUND
in
2015
after
stints
at
UBS,
Paine
Webber
and
Smith
Barney,
said.
The
ETF
closest
to
launch,
which
has
received
approval
by
the
SEC
under
the
ticker
ZZZ,
will
allocate
75%
of
its
capital
to
the
S&P
and
25%
to
bitcoin
futures
(with
an
option
also
to
hold
spot
bitcoin,
Willis
said).
The
idea
is
to
help
mitigate
bitcoin’s
potential
downside
risk
and
notable
volatility
by
investing
in
“the
most
widely
held
index
strategy
on
Wall
Street.”
Willis
said
he
predicts
a
number
of
hybrid
funds
to
launch
with
strategies
that
protect
the
downside
“vol,”
or
volatility,
of
bitcoin,
perhaps
using
U.S.
Treasuries
and/or
other
less
risky
asset
classes.
This
will
also
be
a
way
for
funds
to
differentiate
themselves,
given
the
crowded
competition
after
11
spot
bitcoin
ETFs
were
approved
on
the
same
day.
Like
many,
Willis
sees
a
race
to
the
bottom
in
terms
of
management
fees
—
given
that
it’s
one
of
the
few
ways
firms
can
undercut
their
competition.
Others
are
offering
promotions,
like
Bitwise
slashing
fees
to
zero
for
the
first
six
months
or
until
the
fund
reaches
a
certain
asset
threshold.
But
these
marketing
efforts
can
work
only
for
a
limited
time.
The
other
way
for
firms
to
compete
is
how
they
treat
the
underlying
bitcoin
they
buy
with
investors’
money
—
either
leveraging
it
to
earn
yield
for
the
company
or
holding
it
in
cold
storage.
Some
funds,
Willis
said,
may
rehypothecate
(or
loan
out)
the
bitcoins
in
order
to
earn
a
return,
which
can
earn
“hundreds
of
basis
points.”
See
also:
A
Bitcoin
ETF
Will
Never
Be
Your
Bitcoin
|
Opinion
For
its
part,
ONEFUND
has
no
intention
of
competing
on
fees,
and
thinks
it
will
be
able
to
charge
higher
rates
because
it’ll
guarantee
in
its
prospectus
that
the
bitcoins
won’t
move
from
cold
storage
(the
firm
is
talking
with
Caitlin
Long’s
Custodia
Bank
for
custody
services).
But
there
are
other,
somewhat
intangible
ways
that
firms
can
diversify
away
from
the
pack.
For
instance,
the
one
firm
holding
firm
to
high
fees
is
Grayscale,
which
is
charging
1.5%
on
its
popular
GBTC
product.
GBTC
has
a
lot
of
brand
equity
built
up
as
the
first
traditional
on-ramp
into
bitcoin,
launching
initially
as
a
close-ended
trust
in
2013.
The
fund
has
seen
notable
withdrawals
since
it
transitioned
to
an
ETF
this
year,
though
Willis
said
he’s
surprised
the
fund
hasn’t
lost
more.
“It’s
loyalty.
It’s
laziness.
And
the
other
side
is
bitcoiners
don’t
want
to
go
to
BlackRock
or
Fidelity
—
they
want
to
keep
it
in
the
community,”
he
said.
ONEFUND
is
hoping
to
tap
into
that
same
sense
of
bitcoiner
camaraderie,
a
sort
of
non-institutional
institution.
That’s
part
of
the
reason
why
it
chose
the
Cyber
Hornet
branding,
a
phrase
most
closely
associated
with
uber-bitcoiner
Michael
Saylor,
who
is
not
affiliated
with
the
product.
The
firm,
which
made
news
when
it
allowed
its
INDEX
fund
shareholders
to
vote
by
proxy,
has
also
secured
a
number
of
“kickass”
tickers
for
its
ETFs,
which
will
all
have
different
allocations
between
bitcoin
and
the
S&P500.
Triple-letter
tickers,
like
“the
Qs,”
standing
for
Nasdaq’s
QQQ,
are
valuable
real-estate,
Willis
said,
mentioning
the
“triple
Z”
ticker
on
his
firm’s
flagship
bitcoin
ETF.
Indeed,
a
number
of
recently
launched
ETFs
carry
meme-worthy
names,
including
Valkyrie’s
BRRR
(referring
to
the
pandemic
era
“money
printer
go
BRR”
meme)
and
VanEck’s
HODL
(referencing
how
bitcoiners
buy,
hold
and
rarely
sell).
See
also:
The
Rise
and
Fall
of
Bitcoin
Culture
|
Opinion
“We
think
the
branding
is
going
to
stand
for
doing
things
the
‘right
way,’
the
non-institutional
choice
that
represents
the
community,”
Willis
said.
“We’re
not
owned
by
BlackRock,
we’re
not
owned
by
the
big
institutions.”
Still,
in
some
sense,
Willis’
game
plan
revolves
around
Wall
Street
entering
the
picture.
Although
it
may
not
be
the
most
“orthodox”
way
to
get
people
using
bitcoin,
it
is
the
easiest
and
safest
route
to
mass
onboarding
into
bitcoin
economy
via
ETFs,
perhaps
fulfilling
Cory
Klippsten’s
dream
of
creating
“10
million
bitcoiners,”
Willis
said.
The
first
turn
of
the
supposed
flywheel
came
last
year,
when
BlackRock
announced
its
plan
to
launch
a
bitcoin
ETF,
which
in
a
way
gave
other
Wall
Street
firms
cover
to
also
get
involved.
Now
that
ETFs
are
actually
live,
over
the
next
decade
more
and
more
capital
will
flow
into
bitcoin
—
beginning
with
model
portfolios,
retirement
accounts,
pension
plans
and
ultimately
culminating
in
it
becoming
a
“mainstream
asset
class,”
Willis
said.
“Bitcoin
has
been
alive
and
well
for
15
years,
but
on
Wall
Street
it’s
been
non-existent,”
he
said.
“This
changes
everything.”
