21Shares has launched new risk-adjusted cryptocurrency investment products that are based on the benchmarks of the S&P Dow Jones Indices, with the market meltdown having erased $2 trillion from the value of all cryptocurrencies in only a few months.
More precisely, by rebalancing assets to the U.S. dollar, two new exchange-traded products (ETPs) will aim for a volatility threshold of 40%.
Crypto Investment Products with Considerable Risk
Both exchange-traded products, which will trade on the Swiss SIX Exchange, provide investors access to the two biggest cryptocurrencies, Bitcoin (BTC) and Ethereum (ETH).
Notably, the third-largest stock exchange in Europe and the principal capital market for Swiss equities is the SIX Swiss Exchange, which is a member of the larger SIX Group and operates under the supervision of the Swiss Financial Market Supervisory Authority (FINMA).
The ETPs mix exposure to a volatile cryptocurrency with cash in order to attain an overall aim of moderate volatility. They will trade under the tickers SPBTC and SPETH.
This comes after the company's efforts to introduce the S&P Cryptocurrency Broad Digital Industry (BDM) Index, which contains more than 240 tokens and offers a performance snapshot of the cryptocurrency market.
The index is a development of S&P's newly introduced S&P Digital Market Indices family of benchmarks for digital assets. The business has also said that indexes like SPBTC and SPETH attempt to reduce volatility linked to underlying cryptocurrencies.
Asset Rebalancing
The new risk-adjusted cryptocurrency investment products aim for a volatility level of 40% since they match S&P Dow Jones Indices' benchmarks.
This is accomplished by rebalancing the portfolio or adding additional assets to the USD in times of volatility. To put things in perspective, the benchmarks for S&P indexes manage risk by modifying exposure to the underlying index and altering allocations to U.S. dollars on the fly.
For equal-risk-weighted parity strategies, the S&P Risk Parity Index Series as a whole offers a benchmark that is based on rules. By leveraging futures to reflect various asset classes and the risk/return characteristics of funds provided in the risk parity area, these indexes create risk parity portfolios.
According to Arthur Krause, the director of 21Shares' ETP, the aim of 40 percent relates to volatility rather than investing performance, while large-cap stocks in the US have annual historical volatility of 20 percent. This percentage was 70 percent for Bitcoin and 80 percent for Ethereum, according to him.
We are still in a bear market generally, and inflows to funds are at lower levels than previously, despite the company's crypto inflows setting new all-time highs and just topping $100 billion in new assets under management (AUM) year-to-date. This is shown by CoinShares' most recent weekly report, which reveals that investment product volumes remained very low at $1 billion over the course of the week while digital asset investment products had inflows of $12 million last week.
The Crypto Winter Suite, a group of new products that 21Shares announced last month will be available, targeting both retail and institutional investors in nations including France, Germany, Switzerland, Austria, Sweden, the Netherlands, and Australia.
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