US crypto manager seals deal to push into European market

August 19, 2024

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Bitwise Asset Management has sealed the second takeover of a European cryptocurrency specialist by a US financial group in the past three months.

The US crypto fund manager has closed a deal to acquire London-based ETC Group, expanding its footprint into Europe for the first time, the groups announced on Monday.

The deal is another sign as to how the far larger US investment market is providing the firepower for American companies to expand into the European market, where mainstream asset managers such as BlackRock, Vanguard and Fidelity have built strong positions.

The deal comes after California-based retail broker Robinhood snapped up European cryptocurrency exchange Bitstamp for $200mn in June.

Bitwise’s expansion comes seven years after it was founded and months after it launched two of the first bitcoin and ether-based exchange traded funds in the US. Despite lacking the scale and name recognition of some of its rivals, Bitwise’s bitcoin ETF has amassed more than $2bn since its debut.

“This acquisition allows us to serve European investors, to offer clients global insight, and to expand the product suite with innovative ETPs,” said Hunter Horsley, Bitwise’s chief executive, in a statement.

Bitwise said it expects to have post-acquisition assets under management of about $4.5bn. The deal is Bitwise’s first in Europe, and ETC Group’s employees will be retained while its crypto products are to be rebranded as Bitwise vehicles.

“We think Bitwise is building the best-of-breed firm for this new asset class and have proven their professionalism and leadership over many years,” said ETC Group co-founder and chief strategist Bradley Duke.

“Bitwise and ETC Group are kindred spirits in the way that we run our businesses, in the way that we specialise in digital assets and crypto products only.

“Their footprint is entirely in the US. Our footprint is almost entirely in Europe. It’s a stronger-together kind of story,” said Duke, with ETC’s only operations outside Europe being distribution channels in the Middle East, Africa and Asia. Its products are not licensed for sale in the US.

ETC manages $1.1bn across nine German-domiciled exchange traded crypto products, with $950mn of that accounted for by its flagship Physical Bitcoin ETP (BTCE).

Its range includes funds focused on second-tier cryptocurrencies such as solana, litecoin and cardano, going beyond what is currently permitted in the US, where only bitcoin and ether have been approved for ETFs. This will allow Bitwise to expand into new fields.

“In Europe we can do a little more than you can in the US, so they will be able to implement some of their product ideas through us as an issuer,” Duke said. “The market here is more evolved than in the US,” with not only a wider range of permitted cryptocurrencies but also basket products and ETPs that engage in staking.

Bitwise has a stable of 20-plus products, including a large crypto index private placement vehicle, separately managed accounts and private funds, as well as its ETFs.

Terms of the deal were not disclosed.

“We’re proud of the reputation we have built over the past six years with advisers, institutions and investors as a sophisticated asset manager in crypto markets, and look forward to bringing this expertise to European investors,” Horsley said.

“It’s a bit sad to see [our brand] going, but everyone is excited about the new owners and the work we can do as part of a bigger and more global digital asset company,” said Duke.

Bitcoin jumped above $70,000 in March, May and June but has since receded to about $59,000 though it remains up about 34 per cent since January. Ether’s price rocketed earlier in the year ahead of the first ether ETF launches in the US, but it has steadily unwound gains since then and is up only about 11 per cent in 2024.