With the cryptocurrency market still undergoing a significant downturn, investment fund operators across the industry struggle to attract investors. Now, several of them appear to be cutting fees, as they hope to entice investors to renew their commitments.
Buy the Dip – Now Cheaper Than Ever
Last month, Swiss crypto investment group 21Shares launched a new investment product. The company rolled out the 21Shares Bitcoin Core ETP (CBTC) – an exchange-traded product (ETP) that is built to offer low-cost exposure to Bitcoin even amid the market selloff.
CBTC is a physically-backed Bitcoin ETP. The ETP comes with a total expense ratio of 21 basis points – a clever reference to Bitcoin’s 21 million hard cap.
21Shares also disclosed that the ETP’s ratio is 44 basis points below the next lowest ETP available on the market. Funds offered by other institutional investment firms in the market (such as Global X and Fidelity Investments) usually come between 70 and 77 basis points. On the flip side, 21Shares flagship Bitcoin ETP charges 149 basis points in expense ratios.
Speaking with news sources on the ETP’s launch, 21Shares’ ETP product director, Arthur Krause, explained that the primary reason for its launch was to help investors get into the market. Krause pointed out that while bear markets are the right time to invest, a lot of investors also tend to be afraid of prices going even lower.
By slashing fees, 21Shares is hoping that investors would be more attracted to CBTC – just enough to get them to invest again, regardless of the bloodbath in the market.
The low fees aren’t the only distinction for CBTC. Unlike some of its rivals, 21Shares explained that it plans to lend out some of its BTC inventory. The company explained that it is more likely to do this to help improve the fund’s profitability amid the market downturn. However, given that excessive lending is part of why the market is in such a state – with companies like Three Arrows Capital accumulating massive amounts of crypto and becoming overleveraged – many in the industry would question the prudence of such a move.
Revenues from BTC sales will also go to 21Shares directly – as opposed to the company’s investors. This is because crypto ETPs typically fall out of Europe’s UCITS fund directive, which imposes much stricter restrictions on lending financial securities.
Investment Funds for Every Season
CBTC is part of a series of products launched by 21Shares to help investors profit amid the bear market. The company’s “Crypto Winter Suite”, as it is called, will include several products that are yet to launch. And as Krause explained, the entire suite aims to offer more options for investors looking to enter the market amid these challenging times. The main draw? Lower entry fees.
Just last month, the company announced the Short Bitcoin Strategy ETF (BITI) – an exchange-traded fund (ETF) listed on the New York Stock Exchange (NYSE) that allows investors to bet against Bitcoin using futures contracts.
As 21Shares explained, BITI, one of the best Bitcoin ETFs, will track Bitcoin’s performance daily with figures obtained from the Bitcoin futures index at the Chicago Mercantile Exchange (CME). As the company’s CEO Michael Sapir explained at the time, BITI allows investors who believe that Bitcoin isn’t at its bottom yet to profit or hedge their holdings. He pointed out that these investors can now comfortably get short exposure to the leading coin.
Despite the current market condition, Krause has explained that CBTC and other products in the Crypto Winter Suite will remain on 21Shares’ catalogue even when the market flips bullish. As he explained, the company’s objective is to offer products that can allow investors to enter the market regardless of the condition.
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