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A Rising Crypto Star Has the SEC and Volatile Markets

(Bloomberg) — Ophelia Snyder spent her early twenties making marine biology documentaries for the Discovery Channel. Now, at 29, she’s managing $2.5 billion in a risky and volatile corner of finance.

Snyder’s firm, 21Shares, is based in Zug – known as the Crypto Valley of Switzerland – and offers European investors exchange-traded funds based on bitcoin as well as tokens familiar only to the crypto cognoscenti, such as Polkadot and Avalanche. does.

She is now launching a bitcoin ETF in the US in collaboration with another crypto inspired, Kathy Wood, Snyder has also opened a New York office in hopes of expanding into the country.

Its premise is simple – cryptocurrency investing is spreading around the world, yet buying and selling coins can be a complicated process for retail investors in the US, where for nearly a decade, regulators have allowed the sale of crypto-based funds. has refused.

He is facing many obstacles. Snyder’s mentor Wood is having a poor start to 2022 as tech stocks are sinking and investors are pulling money out of his flagship fund. And just last week the crypto asset fell as the Federal Reserve indicated that interest rake hikes are ahead. The Securities and Exchange Commission, meanwhile, isn’t inclined to flag off crypto ETFs anytime soon.

Snyder is adamant. “We really want to make people feel confident when they enter space,” she said. “It’s all game for us – lowering the barriers to entry and getting people excited about what we feel is revolutionary technology.”

He also co-founded an affiliate company, Amun Ltd., which provides tokens and indices for more sophisticated investors. In three years, Amun and 21Shares have grown to $2.5 billion in managing assets and nearly 100 employees.

Early backers include Graham Tuckwell of Australia, president of ETFS Capital and an ETF pioneer; Adam Draper, founder of Boost VC Accelerator and son of veteran venture capitalist Tim Draper and Ark Investment Management’s Wood.

After meeting at a conference, Wood and Snyder bonded over their mutual interest in crypto. Wood sits on Amun’s board and has personally invested in the company.

Standing between them and the bitcoin ETF they want to launch the SEC, which is wary of making it easier to invest in crypto. Its reluctance isn’t just because most coins have roller-coaster price changes. This is also because they are prone to frequent technical glitches, are vulnerable to manipulation and are often used in criminal activities, all of which make crypto-based funds potentially dangerous for retail investors who are not known for their risk. The SEC must protect.

“The risks are heightened compared to traditional equities or fixed income products, so it’s easy to see how investors can lose money fast,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA Research.

Despite the occasional selloff that propelled cryptocurrency prices last week – they have recovered somewhat – the cryptoverse exploded in 2021. The market cap of some 12,000 tokens tracked by CoinGecko climbed from $1.5 trillion last year to nearly $2.3 trillion. The 21Shares website prominently states that, since early 2021, “Bitcoin is up 27.78%, Ethereum is up 232.78%, and the S&P 500 Index is up 18.32%.”

Such a number of upstart companies and traditional Wall Street firms are scrambling to create new products that will draw even more investors into the wild west of crypto.

21Shares tries to mitigate some of the risk by purchasing the actual coins that its funds hold and storing them in an offline wallet, known as cold storage. This increases the cost of managing a fund, leading to increased annual fees that eat into returns. At 21Shares, they charge between 1.49% and 2.5% — or between $14.90 and $25 for every $1,000 invested — far higher than the 0.5% average fee of passively managed stock ETFs.

Such instruments may legally exist due to the crypto-friendly regulatory environment in Switzerland, and in particular the city of Zug, where 21Shares is based. The enclave, known as Crypto Valley, is home to hedge funds, commodity traders and now crypto companies due to its low corporate taxes and favorable attitude towards blockchain technology. The city also allows citizens to pay taxes in bitcoin and ether.

After earning a degree from Stanford University in Earth systems, Snyder began working in science laboratories, then made documentaries on marine biology for the Discovery Channel. She was more interested in finance, she said, because it is at the heart of “how we can change the world for the better”, be it climate change, women’s rights or education. So she turned to venture capital and then asset management, which made her move into crypto.

Snyder, an Italian-American, was raised between homes in New York and Rome. She spent much of her childhood surrounded by different cultures, thanks to her family’s travels and her time at Choate Rosemary Hall, a boarding school in Connecticut filled with students from abroad.

His mother is an artist and photographer, while his father worked in the family business, Biocraft Laboratories Inc., a leading generic drug manufacturer founded by his grandfather and sold in 1996 to Teva Pharmaceutical Industries for $296 million.

Snyder co-founded both Amun and 21Share with Egyptian-American entrepreneur Honey Rashwan. The two met in San Francisco when she was an undergraduate and was starting companies focused on e-commerce and digital payments.

She and Rashwan realized that their financially savvy mothers were having trouble buying crypto, and wanted to make it easier for them.

In 2018, the two formed Amun – named after an Egyptian god – which initially packed bitcoin, ethereum and other popular coins into a single fund that investors could track, it was sold on the SIX Swiss exchange in Zurich. was listed in. Other baskets that tracked the display of new coins quickly followed.

They soon discontinued a line of ETFs called 21Shares, an allusion to the 21 million cap on the supply of bitcoin. 21Shares now offers 23 crypto ETFs on 10 European exchanges.

Snyder said she will launch a fund around a new coin if clients request it or if internal analysts think it shows promise. Yet the new coins are prone to sharper price fluctuations than bitcoin – which has lost nearly half its value since hitting record highs in November. For example, a coin called AVAX – a token of the Avalanche blockchain project – rose 70% from the beginning of November to the middle of the month, falling by almost 50% by mid-January.

Nate Geraci, president of investment advisor ETF Store, said that the 21Shares fund, which aims to track the price of tokens on blockchains such as Ripple and Cardano, has less liquidity and a smaller market cap than more established coins such as Ethereum and Bitcoin. This makes them harder to track, which reduces their risk.

Snyder acknowledged that investors in their products could lose money, but said that the firm “works very hard to make sure people understand these nuances and how quickly this market is. closer.”

While SEC Chairman Gary Gensler is skeptical of such funds, his agency has approved bitcoin futures ETFs that indirectly track the spot price of tokens with contracts governed by the Chicago Mercantile Exchange.

But for Snyder, future ETFs are inefficient, requiring an active fund manager to move contracts each month. The cost of doing so is passed on to the investors. “Products of the future are more financially complex outside of bitcoin exposure,” she said. “My worst nightmare is that people start buying these products without understanding the specifics.”

Shea and Wood initially aimed to launch a bitcoin futures ETF, but then withdrew their application in December due to such concerns.

While experienced crypto investors can buy 21Shares tokens without fees on exchanges such as Binance, newcomers often find the process, which requires opening an account on an unfamiliar platform, to be daunting.

One of the major arguments behind the push for regulatory approval of funds tracking bitcoin directly, known as spot bitcoin ETFs, is that a crypto ETF is held in a traditional brokerage or retirement account with other mutual fund holdings. can sit.

Snyder said he has “a significant amount” of his own money in crypto, including products from his companies. On a percentage basis, he does far more than he recommends to his clients to put in crypto. “This is my life,” she said. “That’s the thing that I think is going to change the whole world.”

To contact the author of this story:
Claire Ballantine in New York [email protected]

© 2022 Bloomberg LP

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