DeFi Exposure for the Institutional Investor

Picture this; you’re a junior trader sitting on a trading desk in New York, researching your next trade. Your firm is primarily made up of traditional finance OGs that have recently taken notice of crypto. They are starting to come around to the “digital gold” narrative for Bitcoin, and after hearing SEC Hester Pierce’s comments, they even ask you, “does blockchain fix the GameStop situation?” You give them a detailed yet simplified introduction into DeFi, so they reward you by assigning you a project. They want some small exposure to this emerging wild west-like asset class, but you have to pitch them in a way they understand and in a regulatory compliant security. This is your time to shine, but you can’t sound like a retail investor when presenting potential institutional options.

You can go the safe route, a macro report highlighting inflation concerns and how Bitcoin could go up in the next six months, so a private placement into a Grayscale Bitcoin trust is sufficient. It’s a trade that can increase with the underlying going up, plus potentially a small premium (if it's even still there), giving you downside protection or a cherry on top of the ice cream Sundae in six months, minus the 2% holding fee. You can even play it super safe by shorting spot and catching the spread. This crowded trade is a nice safe complement for your bosses. They can brag to their other hedge fund buddies that they have “a small exposure to the new digital asset world.” At the same time, any downside volatility doesn’t affect their minuscule investment.

The other option is riskier, bolder, and potentially rewarding. Let me introduce you to the DeFi Bitwise Index. The recent GameStop situation garnered your superior’s attention for potential blockchain solutions, but now it’s time to pitch them some real alpha to capture profit. You understand your institution isn’t going to invest in random shitcoins, but they might listen to you if you tell them this is a regulatory-approved private placement fund. Not only is it regulatory approved, but these DeFi tokens entitle ownership to decentralized protocols that produce cash flow, have product-market fit, and massive TAMs.

So what is Bitwise?

Bitwise is a cryptoasset manager founded in 2017 that is known for its index funds. The firm today manages more than $1B in assets across multiple funds, serving institutions, family offices, financial advisors, and high net worth individuals.

The team has backgrounds at firms including BlackRock, Goldman Sachs, Deutsche Bank, J.P. Morgan, Facebook, and Wealthfront. Bitwise is backed by institutional investors and venture capital firms, including Highland Capital, Khosla Ventures, General Catalyst, and Blockchain Capital.