What You Need to Know
- The Bitwise Crypto Innovators ETF (BITQ) invests in companies involved in the cryptocurrency ecosystem.
- The ETF will provide exposure to the crypto market without investing directly in cryptocurrencies.
- Most holdings will derive 75% of revenues from crypto markets or hold 75% of their assets in crypto assets.
The first ETF with “crypto” in its name will start trading Wednesday on the New York Stock Exchange Arca. It’s the Bitwise Crypto Innovators ETF (BITQ) which will invest in the stocks of companies that “service and transact in the segment of the economy dealing with crypto assets and distributed ledger technology (e.g., blockchain technology),” according to the ETF’s SEC filing.
BITQ is a passive ETF using “rules-based screening” that provides exposure to the cryptocurrency market without investing directly in those assets.
According to the ETF’s filing with the Securities and Exchange Commission, BITQ will invest in companies with a minimum market capitalization of $100 million that derive more than 75% of their revenue directly from servicing or transacting in the crypto ecosystem or have more than 75% of their net assets accounted for by direct crypto asset holding and large-cap companies, with minimum market cap of $10 billion, that have dedicated business initiatives focused on the crypto ecosystem, as reported in reported in quarterly or annual filings from the past 12 months. The first segment comprises 70% of the index; the second group 30%.
The companies represented include operators of crypto asset trading platforms, custodians and wallets, financial services firms that leverage crypto assets or the blockchain channel, or service clients involved with crypto assets.
They also include crypto asset miners involved in distributed ledger infrastructure, tech companies providing hardware and software for the crypto ecosystems and companies that own a “material amount of crypto assets or generate substantial revenues from those assets or from distributed technology” — i.e. blockchain.
When the ETF’s top holdings were published after Wednesday’s launch, three companies — Coinbase Global, MicroStrategy and Galaxy Digital Holdings — accounted for almost 30% of the fund’s assets.