Ben Strack

<div id="highlights-block_62c4712f8f69d" class="highlights">
 <ul>
 <li>21Shares has seen small outflows despite recent losses, firm’s director of ETP product told Blockworks</li>
 <li>Seven of the 15 worst-performing US ETFs in June were crypto-related funds</li>
 </ul>
 
</div>



The worst-performing European ETPs last month were all crypto products, and digital asset-focused ETFs in the US also notched some of the worst returns during the month.&nbsp;



The highest negative returns during the month in Europe went to the 21Shares Aave ETP, which yielded -52.6% in June, according to Morningstar data.



“These are abysmal returns,” ETF.com Senior Analyst Sumit Roy told Blockworks. “As volatile as crypto is, to see 50% declines in one month is truly astounding. It just speaks to how treacherous the current crypto market is.”



The firm’s Bitcoin Cash ETP, Ethereum ETP and Bitcoin Suisse ETP also made the list of top 15 worst-performing ETPs (exchange-traded products) during the month, with returns of -47.5%, -46.5% and -40.5%, respectively.



“As we’ve experienced turbulent markets, we’ve stayed in close communication with our clients and seen very little outflows as investors hold strong for the long-term,” Arthur Krause, 21Shares’ director of ETP product, told Blockworks in an email.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“In fact, we’ve seen inflows as investors buy the dip.”</blockquote>



The 21Shares Bitcoin ETP and Ethereum ETP recorded the biggest inflows in the European market in June, Krause added, with $20 million and $10 million in net new assets, respectively. The company launched the first ETP within its <a href="https://cms.blockworks.co/21shares-vying-to-build-out-crypto-winter-suite/" target="_blank" rel="noreferrer noopener">planned “crypto winter” suite</a> last week in an effort to help investors navigate the challenging market environment.&nbsp;



Crypto ETPs have been among the worst-performing products each month this year, aside from March, Morningstar Investment Specialist Valerio Baselli told Blockworks in an email. The entire crypto ecosystem is under pressure, as evidenced by bitcoin&#8217;s fall to below the $20,000 mark at the end of the month, he added.



Bitcoin’s price was about $19,620 at 12:30 pm ET, according to data compiled by Blockworks — down roughly 0.5% from 24 hours ago and down about 34% from a month ago.



“As usual, the debate is highly polarized,” Baselli said. “Crypto skeptics think this is the moment the bubble bursts and are relishing the daily lurches downwards, while true believers are exhorting other zealots to keep the faith, ride this wobble out, and even add to their holdings.”



June was the worst month since 2011 for bitcoin, Baselli said, noting that the asset — originally thought to be uncorrelated to equity markets — plunged in parallel with US equities. The second quarter of 2022 was the worst since 1970 for the S&amp;P 500, while the Nasdaq recorded its weakest half-year since 1998, he added.



“The asset class is firmly entrenched in a deep bear market, and these returns are a reflection of that,” Roy said. “It&#8217;s a reminder that crypto and crypto ETPs are extremely high risk, with a similar risk profile to speculative tech stocks.”



As for US ETFs, seven of the 15 worst-performing funds in June were crypto funds, according to Morningstar Direct data obtained by Blockworks.



VanEck’s <a href="https://www.vaneck.com/us/en/investments/digital-assets-mining-etf-dam/" target="_blank" rel="noreferrer noopener">Digital Assets Mining ETF</a> (DAM) saw the lowest monthly returns within the category, at -43%. The asset manager’s <a href="https://www.vaneck.com/us/en/investments/digital-transformation-etf-dapp/" target="_blank" rel="noreferrer noopener">Digital Transformation ETF</a> (DAPP) endured a total return of -41% over the span.&nbsp;



Bitcoin futures ETFs saw similar returns, with such products by ProShares, Valkyrie Investments and VanEck also yielding roughly -41%. Global X’s <a href="https://cms.blockworks.co/global-x-offers-different-type-of-bitcoin-futures-etf/" target="_blank" rel="noreferrer noopener">Blockchain and Bitcoin Strategy ETF</a>, which invests in a mix of equity securities of blockchain companies and US-listed bitcoin futures, performed only about a half percentage point better.



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21Shares

Crypto ETPs Saw ‘Abysmal’ Returns in June

<div id="highlights-block_61b24589b50c4" class="highlights">
 <ul>
 <li>The US Securities and Exchange Commission (SEC) denied WisdomTree’s spot bitcoin ETF in a Dec. 1 letter</li>
 <li>The ETF’s proposed custodian, US Bank, rolled out its crypto custody services for fund managers in October</li>
 </ul>
 
</div>



WisdomTree amended its application for an ETF that would invest directly in bitcoin after the US Securities and Exchange Commission (SEC) rejected its proposal for such a product last week.



“The trust is not registered under the Investment Company Act of 1940, as amended,” according to <a href="https://www.sec.gov/Archives/edgar/data/1850391/000119312521350924/d122075ds1a.htm" target="_blank" rel="noreferrer noopener">a Dec. 8 filing</a>. “However, the sponsor is applying certain of the substantive requirements of the 1940 Act to the operations, infrastructure and oversight of the Trust [in] order to provide investors with some of the significant protections of the 1940 Act.”



As part of the changes, the WisdomTree Bitcoin Trust would use US Bank as a qualified custodian, the SEC disclosure indicates.



<a href="https://cms.blockworks.co/banking-giant-launches-custody-services-for-bitcoin/" target="_blank" rel="noreferrer noopener">US Bank rolled out</a> its crypto custody services for fund managers in October. A company announcement noted at the time that the custody services are intended for institutional investment managers with private funds in the US or Cayman Islands who would like to secure their bitcoin.



Bitcoin-focused financial services company NYDIG was also named the first crypto sub-custodian announced in US Bank’s network of providers.



US Bank had announced in April that it would administer NYDIG’s planned bitcoin ETF this year, pending regulatory approvals. That same month, US Bank participated in <a href="https://cms.blockworks.co/state-street-u-s-bank-in-on-30m-securrency-raise/" target="_blank" rel="noreferrer noopener">a funding round</a> for blockchain-based financial and regulatory technology firm Securrency.



US Bank Wealth Management and Investment Services had about $8.6 trillion in assets under custody and administration and $282 billion in assets under management, as of June 30.



A spokesperson for the company did not immediately return Blockworks’ request for comment.



Though not technically a bank, Fidelity also offers custody services for bitcoin ETFs, noted Sumit Roy, crypto editor and analyst at <a href="https://www.etf.com" target="_blank" rel="noreferrer noopener">ETF.com</a>.&nbsp;



“That said, it is much more common to see a firm like Coinbase act as a custodian, and that&#8217;s for good reason,” he told Blockworks. “They have been providing crypto custody services for a long time, and they have a great reputation.”



Also, under the 1940 Act, the WisdomTree Bitcoin Trust will provide daily disclosures required for ETFs, such as its portfolio holdings, net asset value per share, market price and any premium or discount as well as its media bid-ask spread, according to the amended filing. The trust’s financial statements will be audited at least annually by an independent registered public accounting firm and WisdomTree will comply with financial record keeping and reporting requirements under the Sarbanes-Oxley Act of 2002.



A WisdomTree spokesperson for the fund group declined to comment beyond the filing.



<h3 class="wp-block-heading">Still no spot bitcoin ETF in US</h3>



SEC Chairman Gary Gensler said during a virtual forum in August that the agency would prefer ETFs filed under the Investment Company Act of 1940 that were limited to bitcoin futures contracts. ProShares launched the US’s first futures-based ETF in October and a couple of issuers have brought to market similar offerings.&nbsp;&nbsp;



The amended application comes after the SEC wrote <a href="https://www.sec.gov/rules/sro/cboebzx/2021/34-93700.pdf">a le</a><a href="https://www.sec.gov/rules/sro/cboebzx/2021/34-93700.pdf" target="_blank" rel="noreferrer noopener">t</a><a href="https://www.sec.gov/rules/sro/cboebzx/2021/34-93700.pdf">ter on Dec. 1</a> denying WisdomTree’s proposed spot bitcoin ETF intended for the US market.&nbsp;



Similar to the SEC’s <a href="https://cms.blockworks.co/sec-rejects-vanecks-proposed-spot-bitcoin-etf/" target="_blank" rel="noreferrer noopener">rejection of VanEck’s planned bitcoin ETF</a>, the SEC notes that the Cboe BZX Exchange, on which the ETF’s shares would trade, did not meet certain requirements of the Securities Exchange Act of 1934. A section of the law requires a national securities exchange be “designed to prevent fraudulent and manipulative acts and practices” and to protect investors.



The rejection of VanEck’s proposed product led to many <a href="https://cms.blockworks.co/when-will-the-sec-approve-a-spot-bitcoin-etf/" target="_blank" rel="noreferrer noopener">industry professionals saying</a> they do not expect the SEC to allow a spot bitcoin ETF to hit the US market until the second half of 2022, at the earliest.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“I don&#8217;t think this is going to necessarily move the needle in terms of the SEC approving a spot bitcoin ETF,” Roy said of WisdomTree’s amendments.</blockquote>



WisdomTree manages roughly $75 billion assets, globally. The firm has spot bitcoin and Ethereum ETFs trading in Europe <a href="https://cms.blockworks.co/wisdomtree-launches-spot-etps-in-europe/" target="_blank" rel="noreferrer noopener">and added</a> several physically backed cryptocurrency basket exchange-traded products in the region last month.



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