Presented by Syntax Advisors.
Margareta Hricova: Welcome to ETF TV – your insight into the world of exchange traded funds, issuers and investments. I’m Margareta Hricova, and joining me today is Leah Wald, CEO of Valkyrie, and Deborah Fuhr.
Welcome to the show.
Leah Wald: Thank you so much for having me, Deborah and Margareta.
Deborah Fuhr: Thank you.
Margareta Hricova: Leah, can you tell us a bit about your background? Valkyrie’s background? And why did you decide to create a Bitcoin ETF?
Leah Wald: So Valkyrie is a digital asset management shop. We have a series of cryptocurrency trusts, SMAs, a DeFi hedge fund and this emerging ETF business, where we have this one, newly traded as of Friday on NASDAQ, Bitcoin Futures ETF. We do have quite a few others filed with the SEC at the moment as well.
I co-founded Valkyrie last year with my partner, Steven McClurg, he serves also as the CIO, and we both come from different walks in the asset management world, but very much interested and have been engaged in Bitcoin for a very long time. We came to market with our Bitcoin Trust in January with the desire to create a GBTC-like product that traded closer to NAV. And at that time, we were concerned that the trust would fall into discount. So we actually put our first spot Bitcoin ETF filing in with the SEC in January.
So my personal background, I’ve been in the asset management space for a while, specifically specializing in investing in GBTC originally, which is how I saw some of the nuances that I wanted to fix with Steven, with this trust product of ours. And prior to that, I started at the World Bank for a while and then working for an activist investing hedge fund and then back to the World Bank, and then a couple of other steps, I’m back in RIA world. So it’s very exciting to be here with the ETF now traded and a lot more excitement and filings in the future.
Deborah Fuhr: Well, congratulations, that is exciting.
So from an investors point of view, what are the pros and cons of a futures-based ETF vs a physical-based ETF?
Leah Wald: A futures-based ETF is currently one of only a handful of ways for investors to gain exposure to Bitcoin’s price movements without actually having to buy Bitcoin on an exchange like Coinbase or Kraken. And it does provide, as we know, a cost effective way to hold this exposure in virtually any type of investment account.
The main pros to focus on and benefits of a futures ETF vs, let’s say, a spot ETF is that these futures are traded on the CME, so they’re already regulated, and right now, Bitcoin isn’t. It’s been noted in a lot of different research papers that there’s actually better price discovery in the futures market right now than spot. So there’s more efficient markets, and again, SEC is willing to approve a futures fund.
And demand is clearly there for this type of product. 81% of advisors have reported that clients are asking them about Bitcoin and other digital assets. 76% of advisors believe that clients are investing in crypto outside of their advisory relationships. I’d say the main con simply is; we don’t have a spot Bitcoin ETF at the moment. The commission has signaled very clearly that they’re comfortable with the ’40 Act’-wrapper for Bitcoin futures, but are not yet comfortable in any other wrapper, as well as not quite comfortable with spot. So I think that there’s potentially more exciting products, better tracking with spot in the future, but we do have a good product in the meantime.
Margareta Hricova: So what are the benefits of Bitcoin ETFs for investors that have been buying Bitcoin crypto directly?
Leah Wald: I believe the main one is ease of use. It can be allocated in your IRAs to 401Ks, to other qualified accounts. You know, there’s no need to worry about custody, security, hidden fees. Custody and security are still very concerning and difficult. Not everybody is comfortable dealing with the security necessary to custody your own Bitcoin, so I think that ability to allocate to qualified accounts probably can’t be overstated.
Deborah Fuhr: You mentioned significant demand being stated from financial advisors’ clients. What type of investors do you think will use this product and how do you think they will use it?
Leah Wald: I think that actually it’s going to be a combination of retail and institutional investors who are looking to take advantage of the benefits of the fund. Both have a use case. Both have an interest. I think there’s been many institutional investors that have been waiting on the sidelines to get into Bitcoin and have been waiting for this more familiar wrapper.
From the retail perspective, I think that many have wanted to allocate within their 401ks or ask their advisors to do so, and again have been waiting for a wrapper that’s more comfortable for those accounts. There’s obviously a lot of retail that’s getting more comfortable buying directly from the exchanges, but there’s the tax advantages of the ETF that I think more savvy investors are very familiar with.
Margareta Hricova: And are there any unique features that your ETF offers when compared to the other futures-based Bitcoin ETFs?
Leah Wald: I think the main advantage that Valkyrie offers, and by extension our product, is our expertize in the crypto markets. Steven and I have been working specifically in the Bitcoin ecosystem for many years now. I think that there’s an importance to having the asset manager understand the nuances so that they can potentially pivot accordingly, understand where liquidity providers are, and any challenges that other issuers may face, not just for the Bitcoin futures market, but again, as the commission gets more comfortable with other ETFs and/or structured products to create the most optimal product and address challenges as they come up.
Deborah Fuhr: You did mention you do have plans to do more ETFs, but are there any specific indications of things we might expect from you in the future?
Leah Wald: Well, the Valkyrie Bitcoin Strategy ETF is the first in a planned family of crypto-focused ETFs, but unfortunately, that’s all I can share for today.
Deborah Fuhr: Well, thank you so much for joining us.
Leah Wald: Thank you so much for having me.
Margareta Hricova: So that we can you tell us about some of the other news in the ETF industry?
Deborah Fuhr: Yeah. So last week was pretty busy. We had 42 new listings from 20 issuers and 14 new cross-listings. It’s kind of surprising that 26 of those new listings were in South Korea, so go figure. Most of them were ETNs, many leveraged and inverse, but the themes of ESG and some active products still exist out there, and of course, the two Bitcoin futures products came to market in the US.
If we look at the digital space at the end of September, overall there were 67 products, 178 listings, $12 billion in assets from 19 issuers on 13 exchanges in 12 countries. So it’s not as if we’re just seeing the start of crypto products. They’ve been out there for a while now. Assets, year to date, have grown by 295%. So when we started 2021, there was just three billion invested. Now we’re at just over 12, so it’s not huge numbers, but it is significant growth.
If we look at active ETFs, there’s now 1312 products, 418 billion. There’s 250 issuers on 29 exchanges in 22 countries. Assets are at a record of 418 billion, and the net flows are at 109 billion, so we’re seeing record assets and record inflows.
Turning to ESG, there’s now 795 products with 2224 listings. There’s $324 billion invested. 168 issuers have products on 40 exchanges in 32 countries. When we look at the inflows in the first nine months of the year have been 118 billion, which is much higher than the prior record of 47 billion at this point, and it’s 30 billion more than all of the asset trades last year. So ESG is clearly an area to watch going forward. These are some of the highlights, and I look forward to sharing more next month.
Margareta Hricova: Thanks for another great update, Debbie. And thank you to our sponsors, Syntax Advisors, to Leah, and of course, to all of you for watching. To watch prior episodes and to see news from the ETF industry, visit us at ETFTV.NET. Thank you.
ETF TV News does not provide investment advice, nor recommend products.