Bitwise Asset Management – a crypto investment firm with $1.2 billion in assets under management that is trying make inroads in the country’s $20 trillion financial advisory industry – has raised $70 million at a $500 million valuation, CoinDesk has learned.
The Series B round of funding was led by tech investor Elad Gil and crypto venture fund Electric Capital. Meanwhile, a who’s-who from the financial world also participated, including Daniel Loeb’s Third Point LLC, hedge funder Stanley Druckenmiller, financier Henry Kravis, Bridgewater Associates CEO David McCormick and Nadeem Meghji, a senior managing director at Blackstone.
Bitwise – a five-year-old firm that CEO Hunter Horsley said is now profitable – plans to further strengthen its ties with the financial advisers he says are critical to the widespread adoption of crypto. About 300,000 financial advisers oversee much of the country’s private wealth, he noted.
In an interview, Horsley predicted most Americans “will own crypto in one way or another over the next decade” and said reaching that benchmark will require making crypto as seamless an investment as stocks, bonds and exchange-traded funds (ETFs) are for money managers.
“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 relationship management team.
The firm offers BTC and ETH funds, thematic index funds, including a decentralized finance (DeFi) index fund, and adjacent ETF products, like the Crypto Industry Innovators ETF (BITQ), which invests in companies such as MicroStrategy and Riot that have exposure to crypto.
BITQ alone has seen $45 million in inflows since launching on the New York Stock Exchange in early May.
Horsley said the new funding will help the firm build more products faster. “You’ll see more products from us this year,” he explained.
All that would appear to make Bitwise a natural contender for a bitcoin ETF. Indeed, the company has tried to launch an ETF before, but nuked its own bid in early 2020 after months of stonewalling by the U.S. Securities and Exchange Commission (SEC), which has yet to approve a bitcoin ETF.
For now, Bitwise remains on the sidelines as at least nine other firms try their luck in getting SEC approval for a bitcoin ETF before Gary Gensler, the 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.
Others who contributed the funding round include Coinbase Ventures and ParaFi Capital as well as tech and finance executives from Facebook, Google X, Spotify, Visa and Instacart.
Gil and Electric Capital, the two lead investors, 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 industry.
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” in 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, it’s not at all crazy” to conclude that Bitwise could be “a primary conduit” of inflows of hundrds of billions of dollars from private money managers, Garg said.
‘For the long haul’
Horsley said the new round of funding 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.
In 2017, Bitwise raised $4 million in a seed round of funding that came as the bitcoin market was nearing its historic $20,000 peak, followed by a 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.