Bitwise Asset Management has 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 US) has been listed on NYSE Arca with an expense ratio of 0.85%.
Looking back at the historical development of the internet, Web 1 represented the initial collection of links and homepages which could be viewed by users but lacked meaningful interaction. This version of the internet was primarily about businesses being able to share essential information.
Web 2 refers to the period 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, email, e-commerce, and social media, the primary criticism of this version is the privacy and security concerns for users whose data has been harvested at scale by large tech firms.
Indeed, the notion of Web 3 is being driven by a desire to combat these privacy and security concerns, shifting power back towards individuals and away from the dependency on large tech companies like Amazon, Alphabet, Facebook (Meta), Twitter, and Netflix.
By utilizing decentralized operational structures, blockchain technologies, and cryptocurrencies, Web3 aims to put the ownership and control of peoples’ data back into their own hands. Users will be able to engage with Web 3 through their crypto wallets, allowing them to monetize their data or take it with them when they log off.
Matt Hougan, CIO of Bitwise Asset Management, said: “Today, many experts believe we’re on the cusp of a major evolution in the core architecture of the internet. Any shift of that magnitude will depend on companies that can provide the services and infrastructure to support it. With the Bitwise Web3 ETF, we’re excited to give investors the opportunity to capture one of the fastest-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 reshape the internet as we know it, but they’re among some of the most disruptive and fastest-growing firms in the world. The Bitwise Web3 ETF seeks to capitalize on this great opportunity by offering investors of innovation a straightforward way to access the space. It also leverages our expertise in crypto – the cornerstone of Web3 – as many of these companies are centering their businesses on blockchain technology. We’re looking forward to seeing their anticipated continued growth as the space unfolds.”
Methodology
The fund is linked to the proprietary Bitwise Web3 Equities Index which targets companies across five key Web3 sub-themes: Infrastructure Providers, Finance, the Metaverse, the Creator Economy, and Development & Governance.
Eligible constituents may come from either developed or emerging markets but must have market capitalizations above $100 million and average daily trading volumes greater than $1m.
Bitwise classifies eligible companies according to three Tiers: Tier One includes companies that have substantially all of their operations and growth prospects linked to Web3 sub-themes; Tier Two includes companies with a majority of their operations and growth prospects linked to the sub-themes; and Tier Three includes companies with material, but less than half, of their operations and growth prospects linked to the sub-themes.
The methodology selects up to 30 of the largest companies within Tier One; similarly up to 30 of the largest companies from Tier Two; and up to ten of the largest companies within Tier Three.
The weight of Tier Three is set at 15%, and constituents are equally weighted within this tier.
Tier One and Tier Two collectively account for the index’s remaining weight of 85%. Constituents are initially weighted by float-adjusted market capitalization but then the weights of Tier One constituents are multiplied by a factor of four.
Any single stock is capped at 8%, and the cumulative weight of stocks with weights above 4.5% is constrained to 45%.
As of 4 October, the index’s most notable positions 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 US following the August 2022 launch of the SoFi Web 3 ETF (TWEB US). TWEB is listed on Nasdaq with an expense ratio of 0.59%.