A look at off-chain crypto asset management firms
In August 2022 we provided an overview of crypto index funds and tokens and the market landscape. Crypto index funds can be on-chain or off-chain, and while on-chain funds are blockchain-native, off-chain funds allow investors access to digital assets without dealing with exchanges, wallets, or custodians.
People can invest in crypto index funds through online brokerage accounts or crypto asset management firms, such as Bitwise Asset Management, Grayscale Investments, and Galaxy Fund Management. These firms offer crypto-based off-chain investments, including index funds, tracker certificates, and trusts.
In this article, we compare 8 leading off-chain crypto asset management companies, starting with the longest established, Grayscale Investments. We examine each company in detail to provide investors with a better understanding of their key differences regarding products, pricing, and performance.
The following tables provide a snapshot of the companies:
In 2022, digital asset management companies have continued to raise funds and launch new products to attract new investors. Below is an analysis of their use cases and recent developments:
Grayscale Investments
Founded in 2013, Digital Currency Group’s Grayscale Investments is a leading crypto asset management firm globally in terms of AUM. The company has a broad portfolio of over 15 single-asset and diversified crypto funds, allowing investment in several digital currencies, including Bitcoin, Bitcoin Cash, Ethereum, and Litecoin. The company offers its products via private placements for accredited investors and public quotations for all investors. Investors can purchase publically quoted funds through a brokerage or retirement account.
In 2022, the company launched the following products:
- In May, it launched its first European exchange-traded fund (ETF), Grayscale Future of Finance UCITS ETF, which tracks the investment performance of the Bloomberg Grayscale Future of Finance Index. This fund offers investors exposure to finance, technology, and digital asset companies.
- In March, it launched Grayscale Smart Contract Platform Ex-Ethereum Fund to meet the rising demand for diversified crypto protocols. This altcoin fund focuses on seven smart contract platforms: Cardano, Solana, Avalanche, Polkadot, Polygon, Algorand, and Stellar.
Galaxy Fund Management
Established in 2018, Galaxy Fund Management is the investment management arm of Galaxy Digital and focuses on digital assets and blockchain technology. Galaxy offers individual and institutional investors a diverse portfolio, including single-asset funds, index funds, and a fund of funds.
Recently, Galaxy has invested in or acquired other firms:
- In July 2022, it made a seed investment of an undisclosed amount in Europa Digital Assets, a crypto-focused alternative investment manager. Europa Digital Assets offers its Europa Opportunistic Offshore Fund, which provides exposure to cryptocurrency markets by actively managing investments across spot assets, derivatives, and decentralized finance (DeFi) protocols.
- In May 2021, it acquired Vision Hill Group, an investment consultant and asset manager that provides a range of investment products, analytics, data, and benchmarks for digital assets.
Bitwise Asset Management
Founded in 2017, Bitwise Investments is one of the fastest-growing crypto asset management companies, and it had over $1.3B under management in December 2021. Leading institutions such as Coinbase, Blockchain Capital, Highland Capital Partners, and Khosla Ventures back Bitwise, and it offers 14 private and publicly traded crypto funds. It provides exposure to over 30 different crypto assets, such as Bitcoin, Ethereum, Polygon, and Aave, and 10 non-fungible token (NFT) collections.
Recent Bitwise actions include the following:
- In June 2022, it launched the Ball Multicoin Bitwise Metaverse Index in collaboration with Matthew Ball and Multicoin Capital, a metaverse-focused crypto asset index. It also launched an associated fund for investors willing to invest at least $100,000.
- In April 2022, it launched a separately managed account, allowing financial advisers to provide clients with direct ownership of digital assets. This strategy will hold equal-weighted positions in Bitcoin and Ethereum and rebalance quarterly.
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Hashdex
Hashdex is a leading crypto asset management company in Brazi that is also present in the US and Europe. Its success since launching in 2018 has seen it attract over 260,000 investors. It co-created the Nasdaq Crypto Index with Nasdaq to provide a reliable benchmark for crypto assets. In February 2021, it was the first asset management firm to launch a crypto ETF. Its portfolio includes crypto ETFs, single assets, and index funds.
Its 2022 developments include the following:
- In September, it launched its Hashdex Bitcoin Futures ETF, developed in collaboration with Teucrium Trading and Victory Capital Management. Hashdex registered this ETF under the Securities Act of 1933.
- In April, it received approval from the SIX Swiss Exchange to list its exchange-traded products in Switzerland.
- In May, it launched its Hashdex Nasdaq Crypto Index Europe exchange-traded product (ETP) on the SIX Swiss Exchange. This ETP tracks the performance of the Nasdaq Crypto Index Europe.
- On September 8, 2022, the Hashdex Nasdaq Crypto Index Europe ETP started trading on other European exchanges, including Euronext Paris, Euronext Amsterdam, and Xetra.
- In February, it expanded its Brazilian portfolio by launching its DeFi ETF on the Brazilian stock exchange, attracting nearly 2,200 investors and $10.5M in funding.
Osprey Funds
Founded in 2018, Osprey Funds is a US-based crypto investment management firm that provides investors access to digital assets through funds and managed accounts. The company offers publicly traded Osprey Bitcoin Trust and investment trusts for Polkadot, Algorand, BNB Chain, and Polygon. It serves institutional clients via the Osprey Alpha division and offers the Osprey NFT Fund and the Yieldstreet Enhanced Crypto Fund.
Its significant developments in 2022 include the following:
- In June, it launched the publicly traded Osprey Solana Trust in the US which uses the native token of the Solana network. All US investors can access the fund via the OTCQB market (middle tier of the over-the-counter (OTC) market for U.S. stocks) through traditional brokerage and IRA accounts.
- In May, its Osprey Polkadot Trust started trading publicly through the OTCQX market. It also waived the fund’s 2.5% management fee until January 1, 2023, and may extend this further.
SEBA Bank
Based in Switzerland, SEBA Bank is a regulated digital asset banking platform that offers services in over 25 markets globally. It holds a banking and securities dealer license issued by the Swiss Financial Market Supervisory Authority. SEBA initially offered crypto banking services and later expanded its services to crypto trading, custody, credit, and corporate finance. It currently offers 6 distributed index tracker products: the BTC/USD tracker, the BTC/CHF hedged tracker, the SVMETA Index Tracker Certificate, the SEBAX Crypto Asset Select Index tracker, the ETH/USD tracker, and the DOT/USD tracker.
Recent developments at SEBA Bank include the following:
- In March 2022, it registered its entire ETP suite, which comprises single coin tracker certificates in Bitcoin, Ether, and Polkadot. It will list its entire ETP suite in USD at Euronext Amsterdam and in EUR at Euronext Paris.
- In January 2022, it raised CHF 110M ($115.1M) in a series C funding round led by a consortium of blockchain and fintech investors, including Altive, Ordway Selections, Summer Capital, and DeFi Technologies.
IDEG
Based in Hong Kong, IDEG is a digital asset management group offering multi-strategy thematic solutions to institutional clients. Its products include tools for tracking, earning interest, mining, and structured solutions. In 2019, IDEG was the first to launch a Bitcoin trust in Asia. Unlike many funds and trusts, IDEG actively manages its Asia Bitcoin Trust Iusing various hedging and arbitrage strategies to enhance investor returns and control risk. The Atlas Mining Trust and the IDEG DeFi Tracker SP are the company’s other digital asset investment products.
Its significant 2022 developments include the following:
- In April 2022, it launched two funds: the IDEG Renaissance SP and the IDEG DeFi Tracker SP. The former is a mix of digital assets, including Bitcoin, Ethereum, and DeFi, while the latter is a decentralized finance-themed fund.
- Also in April, it launched the Ethereum Enhanced Portfolio, an actively managed investment vehicle that aims to outperform Ethereum.
Valkyrie Investments
Founded in 2020, Valkyrie Investments is a US-based digital asset management firm that provides exposure to alternative assets for investors. Its products include 6 digital asset trusts, three Nasdaq-traded ETFs, and a DeFi hedge fund. It is also launching a spot Bitcoin ETF. According to ETF.com, the company’s ETFs had a combined AUM value of $30M, as of May 2022. The company provides exposure to some of the largest cryptocurrencies, including Bitcoin, Polkadot, Tron, Avalanche, and Zilliqa.
Its recent developments include the following:
- In June 2022, it raised $11.15M in a strategic funding round led by BNY Mellon, Wedbush Financial Services, and the VC arm of Coinbase. Other participants in the funding round included SenaHill Partners, Belvedere Strategic Capital, and ClearSky.
- In May 2022, it launched the Valkyrie Avalanche Trust, with funds solely invested in Avalanche, the digital asset that powers the Avalanche blockchain network.
Crypto asset management companies are set to disrupt the traditional crypto investment landscape
As more crypto tokens and currencies have come onto the market, it has become more difficult for investors to choose where to invest. This has led to digital asset management firms becoming more popular, as passive investors can access the complex cryptocurrency market with less cost or risk.
As investors are familiar with traditional index-based investing, digital asset management firms are developing structured products, such as index funds, crypto trusts, and tracker certificates that cover different digital assets. With these developments attracting more investors to crypto markets, new managed funds will continue to emerge, reach more areas, and augment the services of crypto-native service providers.
Source: Blockdata
