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Bitwise launches “Web3” thematic ETF

Bitwise asset management launched a thematic equity ETF targeting companies powering “Web 3,” a future iteration of the internet characterized by blockchain technology, artificial intelligence and the metaverse.

Matt Hougan, CIO of Bitwise Asset Management.

The Bitwise Web3 ETF (BWEB USA) was listed on NYSE Arca with a fee rate of 0.85%.

Looking back at the historical development of the Internet, Web 1 represented the initial collection of links and homepages that could be viewed by users but lacked meaningful interaction. This version of the Internet was primarily about allowing businesses to share essential information.

Web 2 refers to the time when users not only consumed content, but created their own through channels such as blogs, media platforms, and marketplaces. While Web 2 created many “free” services such as search engines, e-mail, e-commerce and social media, the main criticism of this version concerns privacy and security issues for users whose data have been collected on a large scale by large technology companies.

Indeed, the notion of Web 3 is driven by a desire to combat these privacy and security issues, empowering individuals and moving away from reliance on big tech companies like Amazon, Alphabet, Facebook (Meta), Twitter and Netflix.

Using decentralized operational structures, blockchain technologies, and cryptocurrencies, Web3 aims to put ownership and control of user data back into their own hands. Users will be able to interact with Web 3 through their crypto wallets, allowing them to monetize their data or take it with them when they log out.

Matt Hougan, CIO of Bitwise Asset Management, said, “Today, many experts believe we are on the cusp of a major evolution in the basic architecture of the Internet. Any change of this magnitude will depend on companies that can provide the services and infrastructure to support it. With the Bitwise Web3 ETF, we are excited to offer investors the opportunity to capture one of the most emerging themes in technology through a diverse mix of companies that we believe will lead the charge.

Hunter Horsley, CEO of Bitwise Asset Management, added, “Today’s Web3 companies are not only helping to reshape the internet as we know it, they are some of the most disruptive and fastest growing companies in the world. world. The Bitwise Web3 ETF seeks to capitalize on this great opportunity by offering innovation investors an easy way to access the space. It also leverages our expertise in cryptography – the cornerstone of Web3 – as many of these companies center their activities around blockchain technology. We look forward to seeing their continued growth planned as the space unfolds.

Methodology

The fund is linked to the property Bitwise Web3 Stock Index which targets businesses across five key Web3 subthemes: infrastructure providers, finance, the metaverse, the creator economy, and development and governance.

Eligible constituents may be from developed or emerging markets, but must have market capitalizations greater than $100 million and average daily trading volumes greater than $1 million.

Bitwise categorizes eligible businesses into three tiers: Tier One includes businesses with substantially all of their operations and growth prospects related to Web3 subtopics; Level 2 includes companies whose majority of operations and growth prospects are related to the sub-themes; and Level 3 includes companies with most, but less than half, of their operations and growth prospects related to the subtopics.

The methodology selects up to 30 of the largest Tier 1 companies; likewise up to 30 of the largest companies in Tier Two; and up to ten of the largest Tier Three companies.

Level 3 weight is set at 15% and constituents are also weighted within this level.

Tier One and Tier Two collectively represent the remaining 85% weight of the index. Constituents are initially weighted by float-adjusted market capitalization, but then Tier 1 constituent weights are multiplied by a factor of four.

Any individual stock is capped at 8% and the aggregate weight of stocks with a weighting above 4.5% is capped at 45%.

As of October 4, the most notable positions in the index included Coinbase Global (9.2%), Roblox (8.2%), Equinix (7.5%), Unity Software (7.2%), Meta Platforms (7.1%), Twitter (6.1%), Shopify (4.8%) and Cloudflare (4.7%).

The fund is the second dedicated Web3 thematic ETF available in the United States following the August 2022 launch of the ETF SoFi Web 3 (TWEB US). TWEB is listed on Nasdaq with an expense ratio of 0.59%.

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