Bitwise Asset Management, a crypto firm making inroads with America’s $20 trillion financial advisory industry, raised $70 million at a $500 million valuation, CoinDesk has learned.
The Series B round was led by tech investor Elad Gil and crypto venture fund Electric Capital. A who’s-who of Wall Street billionaires also joined in, among them pro-crypto hedge funders (Daniel Loeb, Stanley Druckenmiller) and top investment firm brass (Blackstone’s Nadeem Meghji, Bridgewater’s David McCormick).
Now five years old, Bitwise, which CEO Hunter Horsley said is already profitable, plans to further strengthen its ties with the financial advisers he says are critical to widespread adoption. Some 300,000 financial advisers oversee much of the country’s private wealth, he said.
Horsley, who in an interview predicted most Americans “will own crypto in one way or another over the next decade,” said reaching that benchmark will require making crypto as seamless an investment as the stocks, bonds and exchange-traded funds (ETFs) their money managers understand.
“They’re not trying to trade events or outsmart the market, they’re just going to want crypto to fit in with the rest of their investment lives,” he said.
Bitwise goes big
Bitwise has already established ties with 200 financial advisory firms, more than double the count from January. It plans to find more partners by bolstering its client education resources and its relationship management team.
Those backend hires help Bitwise sell its products: crypto dressed in Wall Street clothing.
The firm offers BTC and ETH funds; thematic index funds long on decentralized finance (DeFi) tokens; and adjacent ETF products, like the Crypto Industry Innovators ETF (BITQ), which invests n companies like MicroStrategy and Riot instead of coins.
That recipe’s helped drive Bitwise’s assets under management to $1.2 billion, Horsley said. BITQ alone has seen $45 million in inflows since launching on NYSE in early May.
ETF hopes?
Horsley said the funding round will give Bitwise extra runway to help it build more products faster: “You’ll see more products from us this year.”
All this would appear to make Bitwise a natural contender for a bitcoin ETF. Indeed, the company has chased the elusive gateway to easy Wall Street access before. But it nuked its own bid in early 2020 after months of stonewalling by the U.S. Securities and Exchange Commission (SEC).
For now at least, Bitwise remains on the sidelines as at least nine other firms try their luck before a new SEC chairman.
“The ETF is a great wrapper. But we’ve grown 20x year over year without a [bitcoin] ETF,” Horsley said.
“There are a variety of different pipes that we can open up to help investors pull crypto into the rest of their lives,” he added.
Storied backers
Bitwise’s new backers include heavyweight investment names – Druckenmiller, Loeb, Henry Kravis – well-known crypto funds – Coinbase Ventures, ParaFi – and a deep bench of tech and finance executives – from Facebook, Google X, Bridgewater, Spotify, Visa and Instacart – more than 30 total.
The two lead investors, Gil and Electric Capital, joined Bitwise when institutional crypto adoption was more thought experiment than reality. That dynamic has radically changed after more than a year of major financial firms jumping into the space.
Electric Capital co-founder Avichal Garg said Bitwise has walked a careful line to build a backer list of “just legendary people.”
“You really need to understand crypto. But you also really have to understand traditional finance and Wall Street and asset management,” Garg said. “So I think the investors that they brought in are sort of reflective of that.”
He said the equity investors are betting Bitwise is the “leading asset management company” building for a crypto market that he thinks could still grow 10 to 100 times larger.
“Once you start talking capital flows into assets and the $20 trillion that’s sitting with asset managers,” he said, “it’s not at all crazy” to conclude that Bitwise could be “a primary conduit” of hundred-billion-dollar inflows from private money managers.
‘For the long haul’
Horsley said the round came together in the wake of bitcoin’s April highs: “If $60,000 was the top, this round is happening after the top,” he said.
As it happens, Bitwise’s seed round, a $4 million affair in late 2017, came right as the bitcoin market was nearing its historic $20,000 peak, followed by a massive 65% sell-off in less than a month. Bitwise unveiled its seed funding just weeks before the market top.
Then, and now, Horsley said Bitwise’s backers are “in it for the long haul.”
“They think that this is an asset class that’s here to stay and they think that Bitwise has the potential to be an enduring institution in the space,” he said.
Source: Coindesk
