In cooperation with Ark Investment, the asset manager of tech investor Cathie Wood, 21shares from Switzerland is one of the few Bitcoin ETF providers in the USA. However, 21shares has grown big with crypto ETPs for the DACH region. In an interview, 21shares’ Head of Northern Europe, Bernhard Wenger, reveals how he assesses the current market situation, especially with regard to ETFs and ETPs.
BTC-ECHO: The Bitcoin ETFs can be considered a success since their launch in January. How satisfied are you as one of the issuers with the inflows of funds?
Bernhard Wenger: We are very satisfied. You could say that the first few months have exceeded expectations. The fact that we, as a European provider, together with Ark Investment, are right after Grayscale, BlackRock and Fidelity in terms of assets under management (AuM) shows that we have done a lot of things right.
Who are the buyers? So far, primarily retail investors, right?
Especially with regard to Europe, where we have been active the longest, it can be said that it is mainly private customers or family offices who are demanding crypto ETFs. The large institutional investors such as insurance companies or pension funds are certainly not among the early adopters. However, this situation has started to change since the middle or end of last year. Since then, demand from institutional sources has been increasing relative to retail demand. Particularly important institutional buyers are hedge funds, which use crypto ETFs for trading or for active trading strategies.
In the state of Wisconsin, there has already been a case where a pension fund has also gotten involved and purchased Bitcoin ETFs for over 160 million US dollars. Will this remain an exception for the time being?
There are rarely isolated cases. It is very likely that other pension funds will follow. In Europe, too, we are already seeing the first pension funds investing in crypto. Recently, the interest of insurance companies has also increased. We can imagine an entry into crypto ETFs in the near future, especially in the case of unit-linked insurance.
Ultimately, we here in Europe are benefiting from the new institutional demand in the USA. The fact that the major asset managers there have taken up the issue sends a signal to European investors.
What are your expectations for the Ether ETFs in the US? Will they be as successful as the Bitcoin ETFs?
I don’t think that the Ether ETFs in the US will be as successful in absolute terms as the Bitcoin ETFs. On the other hand, Ether benefits from the fact that its market capitalization is smaller and even smaller inflows could be enough to have a potentially large effect on the price. Since the value proposition or use case is completely different to Bitcoin, the Ether ETFs can address other investor needs. Looking at the Ether ETPs in Europe, we can currently even say that they are in greater demand than Bitcoin ETPs.
Staking is prohibited for Ether ETFs in the USA. How serious do you think this loss of return will be for the product’s attractiveness?
We European investors are at an advantage here because we can benefit from staking with our ETPs. In the long term, I can well imagine that ETFs will also be allowed to do staking. It is not forbidden per se. The more the regulatory situation in the USA becomes clearer, the more likely it is that staking will be permitted in ETFs. After all, the risks are manageable and easy to control. Especially since an ETF or an ETP can never do 100 percent staking in order to ensure liquidity in the underlying.
How likely do you think it is that additional Altcoin ETFs, such as a Solana ETF, will be approved?
Predicting regulatory developments is very difficult. After all, we were all surprised that Ether ETFs are now to be approved. Ultimately, you can’t stop a moving train, which in turn does not mean that every small altcoin will now get an ETF. That will certainly not happen, as quantity and liquidity criteria must be met.
Do ETPs in this country also benefit from the ETF hype in the USA, even if they don’t have an “F” in their name?
This will definitely make our ETPs more acceptable in this country. Even if we cannot have an ETF for a single value in Europe, it is possible to issue an ETF with several coins in Europe as soon as we have a diversified index. After all, there are also commodity ETFs in Europe, while there are only ETCs for gold.
Nevertheless, ETPs do not need to hide from ETFs. It is not justified to this extent that ETFs are always put on a pedestal compared to ETPs. ETPs are a safe and established form of investment in Europe. We have the same market participants, the same market makers, etc. as ETFs.
And where is the journey going in terms of products, now that the institutions in particular are getting more involved?
We expect greater demand for indices and baskets in the future. This will happen especially when intra-crypto correlations decrease, as it then makes more sense to diversify. In the future, we will increasingly have different sectors that correlate differently with each other, just like in the stock market. For example, there will then also be more cyclical and less cyclical crypto sectors that can be represented by corresponding indices.
What do you see as the price drivers in the coming months? Will monetary policy be more supportive or more of a burden?
What will certainly move the market are potential interest rate cuts in the US. For risk assets like Bitcoin, this could be a real trigger. The macroeconomic impact on Bitcoin and crypto should not be underestimated. Combined with the continued strong inflows into ETFs and ETPs and institutional adoption, I expect the perfect whirlwind to the upside. In the end, the risk of not being there is greater than the risk of being there.
This might also interest you