Crypto demand pushes Schwab to launch new ETF despite bitcoin crash

Investors have a new way to buy cryptocurrencies.

Schwab Asset Management released its Schwab Crypto Thematic ETF (STCE) this month to answer investor demand.

David Botset, who was directly involved in the launch, told CNBC’s “ETF Edge” the new product is unique because investors get an indirect way to significantly play cryptocurrencies.

“It is a very speculative investment,” the head of equity product and strategy said on Monday. “But we are seeing certain segments of Schwab investors that are seeking access to this asset category in their portfolios.”

The fund does not target actual cryptocurrencies. Instead, it bundles companies with skin in the game.

“[The Schwab Crypto Thematic ETF] is different than other crypto-related ETFs on the market today in the way that the index identifies, selects and weights constituents based on a company’s relevance to the crypto ecosystem using natural language processing,” Botset said in the ETF launch news release.

Widely held crypto names including MicroStrategy, Marathon Digital, Riot Blockchain, Coinbase, Silvergate Capital, Robinhood and Interactive Brokers have holdings in the fund, not unlike other crypto-related thematic products.

The crypto thematic ETF, with its low-cost and index design, differ from similar funds, Botset explained. The fund is “the lowest-cost crypto-related product in the marketplace at 30 basis points.” A basis point equals 0.01 percentage point. 

“Our approach of combining the human insight with AI and in models to assess companies’ exposure to the crypto theme, we think, is differentiated,” he said of the fund.

Botset said he finds that small companies, in particular, have the potential to grow as a result of this strategy.

The Schwab Crypto Thematic ETF is up about 5 % since its launch on Aug. 4.

Botset contends launch timing “was happenstance,” acknowledging the dramatic downside in the space.

Wall Street is still coping with this year’s crash or so-called “crypto winter.” But bitcoin, the world’s biggest coin by market cap, is showing signs of strength this month.

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