Defiance ETFs has introduced the world’s first ETF enabling investors to take a bearish position on companies involved in the blockchain and crypto ecosystems.
Sylvia Jablonski, CEO and CIO of Defiance ETFs.
Listed on Nasdaq, the Defiance Daily Short Digitizing the Economy ETF (IBIT US) comes with a management fee of 0.95%.
Its estimated total annual expenses is much higher, however, stated as an eye-watering 4.70%.
The blockchain, a decentralized, distributed ledger that securely records digital transactions, is expected to be one of the most disruptive innovations in recent history due to its potential to impact business models across virtually all segments of the economy.
According to an analysis by Markets and Markets, the blockchain industry is expected to grow from $4.9 billion at the end of 2021 to $67.4bn by 2026, representing a compound annual growth rate of 68.4%.
The technology has, however, also been met with caution due to its hidden vulnerabilities as well as the unusually high level of hype surrounding it. The value of crypto-related businesses, platforms, and currencies have also fallen dramatically in 2022.
Amid this potential for volatility, IBIT provides sophisticated investors with an effective tool to better manage their thematic exposure to the blockchain industry by hedging their positions in anticipation of market downturns.
Sylvia Jablonski, CEO and CIO of Defiance ETFs, said: “We remain highly bullish on the growth of crypto and the digital asset ecosystem over the next few years. However, given the recent onset of the crypto winter – the flood of layoffs and revenue losses – we believe shorting positions such as Coinbase, Galaxy, and Robinhood, along with those involved in the metaverse, like Meta and Roblox, will provide downside protection in the current environment.”
Investment approach
IBIT provides the inverse (-100%) daily return of the $580 million Amplify Transformational Data ETF (BLOK US).
BLOK delivers actively managed exposure to global companies involved in the development and utilization of blockchain technologies. Only securities with market capitalizations above $100 million and average daily trading volumes in excess of $25m will be chosen for inclusion.
Eligible firms include those that are actively engaged in blockchain-related R&D, profiting from the demand for blockchain applications, partnering with or investing in blockchain companies, or acting as a member of multiple blockchain consortiums.
The portfolio targets at least a 70% allocation to ‘core’ companies, defined as those deriving significant revenue from blockchain-related businesses or those that are among the largest five investors in blockchain companies.
Security selection is driven by current industry news as well as company fundamentals such as price to earnings and potential revenue growth.