Defiance, an ETF provider, has introduced a fund that wagers against the blockchain industry by taking short positions in the US’s largest blockchain ETF.
The Defiance Daily Short Digital Economy ETF (IBIT) aims daily inverse returns of Amplify ETFs’ Transformational Data Sharing ETF as the industry grapples with the decline in crypto and traditional markets (BLOK).
The fund firm previously announced plans to start IBIT in April.
As of Wednesday, the new fund has entered short positions in the actively managed BLOK fund, which includes top holdings Core Scientific, Silvergate, Accenture, IBM, and Overstock.com.
BLOK has returned approximately 26% since its launch in 2018, but it is down approximately 50% year to far and 15% in the last month. The ETF has approximately $540 million in assets.
Though Defiance CEO Sylvia Jablonski is optimistic about the future of cryptocurrency in the next years, the executive referred to recent layoffs and revenue losses in the business.
“We believe shorting positions such as Coinbase, Galaxy and Robinhood, along with those involved in the metaverse — like Meta and Roblox — will provide the best downside protection in the current environment,” she added.
Coinbase is down around 73% year to date, while Galaxy Digital and Robinhood are down roughly 70% and 47%, respectively, in 2022.
When the Federal Reserve stops raising interest rates and inflation begins to fall, investors will likely return to crypto, according to Jablonski.
“Investors are taught to have well diversified portfolios, a barbell approach, or hedges for tough times,” she said in an email. “Having a product available to cover the crypto space in this same spirit could be very advantageous to traders and investors alike.”
According to ETF.com, Defiance has seven ETFs trading in the US, totaling around $1.2 billion in assets. Its largest ETF is the Next Gen Connectivity ETF (FIVG), which has amassed approximately $1 billion in assets since its inception in March 2019.
The firm created the Defiance Digital Revolution ETF (NFTZ) in December, which invests in firms with NFT, blockchain, and cryptocurrency exposure. Silvergate is a top-five holding in NFTZ, along with Marathon Digital, Draftkings, Cloudflare, and Robinhood.
NFTZ, which has only acquired $6 million in assets during its time on the market, is down almost 63% this year.