21Shares Launches S&P Risk Control Bitcoin and Ethereum ETP
With the cryptocurrency market down more than 50% this year, 21Shares is working to replicate the S&P Dow Jones benchmark with its new risk-adjusted crypto investment product.
Swiss crypto investment firm 21Shares has launched two new exchange-traded products (ETPs), offering investors access to the largest cryptocurrencies - Bitcoin (BTC) and Ethereum (ETH) - while aiming to rebalance assets against the U.S. dollar. investments to mitigate volatility.
The two new products, 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 firm announced Wednesday that the ETP will trade under the symbols SPBTC and SPETH.
Both ETPs target a volatility level of 40%, which is achieved by dynamically rebalancing or allocating more assets to USD when volatility rises. These products attempt to replicate the benchmark of the S&P Index, controlling risk by adjusting exposure to the underlying index and dynamically allocating to the U.S. dollar.
Arthur Krause, director of ETPs at 21Shares, emphasized that the 40% target refers to volatility rather than investment performance. In a statement to Cointelegraph, Krause noted that U.S. large-cap stocks have seen annualized historical volatility of 20%. Bitcoin has a volatility rate of 70 percent, while ethereum has a volatility rate of 80 percent, he said, adding:
“The 21Shares S&P Risk Controlled Index ETP combines exposure to volatile cryptocurrencies with cash (zero volatility) in an attempt to achieve the overall goal of moderate volatility.”
Sharon Liebowitz, senior director of innovation at S&P Dow Jones Indices, mentioned that the firm has been actively involved in cryptocurrencies in recent years. Last year, S&P launched a cryptocurrency index that tracks the performance of the crypto market. Liebowitz pointed to SPBTC and SPETH as examples of indices designed to address the volatility associated with the underlying cryptocurrency.
The new ETP joins 21Shares’ bear market-focused product called the Crypto Winter Suite. 21Shares launched investment products in June, aiming to offer investment products specifically designed for low-cost cryptocurrencies during market sell-offs.
Like other crypto ETPs from 21Shares, Crypto Winter Suite targets retail and institutional investors in countries such as France, Germany, Switzerland, Austria, Sweden, the Netherlands, and Australia.
Despite the ongoing bear market, 21Shares has seen massive inflows on its platform, with $100 billion in new assets under management (AUM) so far this year. “While our AUM is now down due to market conditions, our inflows are at an all-time high,” Krause said, adding that 21Shares currently has $1 billion in AUM. He added:
“Investors remain strong and are still generating inflows for the long game. Investors who believe in cryptocurrencies are ‘buying the dip’ – especially 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.