21Shares Unveils S&P Risk Controlled Ethereum and Bitcoin ETPs

Key Insights:

• SPBTC and SPETH will trade on the Swiss SIX Exchange.
• The two new exchange-traded products replicate S&P Dow Jones Indices’ benchmarks. 
• They target a volatility level of 40% by rebalancing assets to the U.S. dollar.

With the market crash wiping $2 trillion off the value of all cryptocurrencies in just a matter of months, 21Shares has unveiled new risk-adjusted crypto investment products that are based on S&P Dow Jones Indices’ benchmarks.

More specifically, two new exchange-traded products (ETP) will target a volatility level of 40% by rebalancing assets to the U.S. dollar.

Risk-adjusted Crypto Investment Products

Both exchange-traded products offer investors exposure to the largest cryptocurrencies, Bitcoin (BTC) and Ethereum (ETH) and will trade on the Swiss SIX Exchange.

Notably, the SIX Swiss Exchange, which is part of the wider SIX Group and operates under the supervision of the Swiss Financial Market Supervisory Authority (FINMA), is Europe’s third largest stock exchange and a primary capital market for Swiss securities.

The ETPs, which will trade under the tickers SPBTC and SPETH, combine exposure to a volatile cryptocurrency with cash in order to achieve an overall target of moderate volatility.

This follows the company’s efforts in launching a S&P Cryptocurrency Broad Digital Market (BDM) Index that provides a performance snapshot of the cryptocurrency market and includes more than 240 tokens.

The index is part of an expansion of S&P’s recently launched series of digital asset benchmarks, the S&P Digital Market Indices. Moreover, the company has noted that SPBTC and SPETH are examples of indexes aiming to address volatility associated with underlying cryptocurrencies.

Rebalancing Assets

Since the new risk-adjusted crypto investment products replicate S&P Dow Jones Indices’ benchmarks, they target a volatility level of 40%.

This is achieved through rebalancing or allocating more assets to USD in the event of volatility. For context, S&P indexes’ benchmarks control risk by adjusting exposure to the underlying index and dynamically allocating to U.S. dollars.

The S&P Risk Parity Index Series as a whole provides a rules-based benchmark for equal-risk-weighted parity strategies. These indices construct risk parity portfolios by using futures to represent multiple asset classes and the risk/return characteristics of funds offered in the risk parity space.

21Shares’ ETP Director Arthur Krause has expressed that the 40% target refers to volatility rather than investment performance, adding that large-cap equities in the United States demonstrate annual historical volatility of 20%. For Bitcoin, this figure stood at 70%, while Ethereum’s volatility amounted to 80%, he said.

Despite the company’s crypto inflows hitting new all-time highs, recently reaching $100 billion in new assets under management (AUM) year-to-date, we are still in an overall bear market and inflows to funds are at lower levels than before. This is exemplified by CoinShares’ latest weekly report which shows that digital asset investment products saw inflows totalling $12 million last week, with investment product volumes remaining very low at $1 billion over the week.

Last month, 21Shares announced the launch of a set of new products dubbed the Crypto Winter Suite that targets both retail and institutional investors in countries like France, Germany, Switzerland, Austria, Sweden, the Netherlands and Australia.