State Street and Galaxy Asset Management Launch Three New Cryptocurrency-Focused ETFs

The move comes as investors have been pulling out of spot Bitcoin funds, reflecting a sense of fear in the market.

State Street Global Advisors and Galaxy Asset Management have introduced three new cryptocurrency-focused exchange-traded funds (ETFs) on Tuesday, amidst record outflows from spot Bitcoin funds.

The new ETFs, tracking a diversified index of digital asset companies and relevant ETFs, began trading on the New York Stock Exchange Arca. They are designed to appeal to investors seeking a broader exposure to the crypto market, as opposed to the short-term, volatile movements of a single digital currency.

The SPDR Galaxy Digital Asset Ecosystem ETF (DECO) will invest in shares of U.S.-listed companies with at least 50% of their revenue or assets linked to the digital asset industry. This includes crypto exchanges, miners, and technology firms.

Meanwhile, the SPDR Galaxy Hedged Digital Asset Ecosystem ETF (HECO) will employ a similar strategy, except that it will also hedge its exposure to the S&P 500 index. Lastly, the SPDR Galaxy Transformative Tech Accelerators ETF (TEKX) will combine exposure to the digital asset ecosystem with other emerging technology sectors.

These new funds come as investors have been pulling out of spot Bitcoin funds, reflecting a sense of fear in the market. According to Bloomberg data, 12 U.S.-listed spot Bitcoin ETFs have seen their longest streak of outflows, with a total of $706 million being withdrawn.

This trend underscores a wavering risk sentiment among investors, especially in light of mixed economic data leading up to this month’s Federal Reserve meeting.

“Unlike traditional spot Bitcoin ETFs that directly hold cryptocurrencies, these new funds aim to provide a diversified approach,” said Anna Paglia, chief business officer for State Street Global Advisors.

“They will invest in shares of crypto-linked companies and combine these with other ETFs that hold physical Bitcoin or futures contracts. Some investors are not comfortable with the short-term, volatile price swings of single-currency crypto. We believe the next evolution of this market is the introduction of actively managed digital asset portfolios.”

Bitcoin Market Sees Record Outflows

Data from Sept. 6 showed that net outflows from 12 spot Bitcoin ETFs reached $170 million, with Fidelity and Grayscale leading the charge.

For example, Fidelity’s FBTC saw nearly $86 million in outflows, marking its seventh consecutive session of negative flows.

Grayscale’s Bitcoin Trust (GBTC) also experienced heavy losses, with $53 million in outflows recently. Since its inception, GBTC has lost over $20 billion, and in just eight days, the fund has seen a $280 million exit.

Other funds, such as Bitwise’s BITB and ARK 21Shares’ ARKB, also saw outflows, illustrating a broader pattern of declining investor confidence in Bitcoin ETFs as crypto prices lack significant catalysts to recover from the current downturn.

Over the past month, the Bitcoin price has experienced significant volatility, with notable ups and downs, as the largest cryptocurrency on the market hit a one-month low of $52,600 on Friday. Since then, however, BTC has regained the $56,740 level, but it has still been down 8% over the past two weeks and nearly 6% over the past month.

As of now, it remains to be seen if easier macroeconomic conditions can be a catalyst not only for the BTC price but also for the broader crypto market, with the Federal Reserve’s rate cut as the key to the next moves.

Featured image from DALL-E, chart from TradingView.com