The universe of crypto-based exchange traded funds is growing and increasingly unique. With spot bitcoin and ethereum ETFs already on the market, issuers are looking to bring solana and XRP funds, among others, to market.
ETF sponsors have also been innovating when it comes to equity-based funds with crypto roots. A category that was once largely rooted in cryptocurrency mining equities has evolved considerably over the past couple of years and that evolution is matriculating over to the fixed income space.
Just look at the new Securities and Exchange Commission (SEC) filing for the AlphaBit Investments Digital Asset Debt Strategy ETF (NASDAQ: DADS). Props on the cute, easy-to-remember ticker – a marketing tool whose value should not be underestimated.
DADS isn’t live yet, but the prospectus dated May 15th includes the aforementioned ticker and an expense ratio (1.04% per year) and those are often signs that an ETF is nearing launch. When DADS does come to market, it will provide investors with a fresh take on corporate bonds – a space that could use some excitement and refreshing, at least as far as ETFs are concerned.
Drilling Down on DADS
DADS will be actively managed, which is probably a good idea when considering the union of bitcoin and corporate debt is still a nascent concept. In terms of selection universe, the new ETF (assuming it comes to market) will hold corporate bonds issued by the following types of companies: bitcoin miners and data center operators, firms that hold at 1,000 bitcoin in their corporate treasuries, asset managers and payment/platform companies.
The DADS prospectus doesn’t mention specific companies by names, but bitcoin miners are self-explanatory. Likewise, the number of non-mining companies holding at least 1,000 bitcoin is small though mostly familiar.
As for the category of payment/platform firms, it’s not a stretch to assume companies such as Block (NYSE: XYZ) and PayPal (NASDAQ: PYPL) fit in there. For the fourth category in DADS, there’s a qualifier that the asset managers “are industry leaders in driving the adoption of digital assets or facilitating commerce with the use of digital assets through offering products or services such as digital financing, tokenized products, or digital asset exchanges.”
That opens a lot of doors while implying the DADS roster could debt issued by companies like Coinbase (NASDAQ: COIN) as well as corporate bonds courtesy of ETF issuers with crypto footprints. We’ll see if that educated guess is accurate.
More DADS Details
Given that the intersection of corporate bonds and crypto bonds is still relatively young, it makes sense that DADS is actively managed because flexibility is needed here. That much is clear in the prospectus where the issuer notes that the ETF’s 35 to 70 holdings can include convertibles, junk bonds, including highly distressed fare, and preferred stocks.
To be clear, what DADS does NOT do is invest directly in bitcoin or any other cryptocurrency. That might be for the best because bitcoin and crypto at large aren’t for everyone and DADS is likely to be “adventurous” relative to traditional corporate bond ETFs.
On the other hand, for clients and investors that are income-hungry and risk-tolerant, the ETF (assuming it launches) could be an interesting satellite positon.
Related: Crypto Main Street Case Gets a Lift With E*Trade News