Defiance Debuts ETF to Short Blockchain Companies

ETF provider Defiance has launched a fund that bets against the blockchain industry by taking short positions in the largest blockchain ETF in the US.

As the industry grapples with the downturn in crypto and traditional markets, the Defiance Daily Short Digital Economy ETF (IBIT) seeks daily inverse returns from Amplify ETF’s Transformational Data Sharing ETF (BLOK).

The fund group had revealed plans to launch IBIT in April.

The new fund will enter short positions in the actively managed BLOK fund, which includes top holdings Core Scientific, Silvergate, Accenture, IBM and Overstock.com, starting Wednesday.

BLOK has returned around 26% since its inception in 2018, but the fund is down about 50% so far this year and around 15% in the past month. The ETF has about $540 million in assets.

Although Defiance remains optimistic about the growth of crypto over the next few years, CEO Sylvia Jablonski said in a statement, the executive pointed to the recent layoffs and revenue losses surrounding the industry.

“We believe shorting positions like Coinbase, Galaxy and Robinhood, along with those involved in the metaverse — like Meta and Roblox — will provide the best protection against downside in the current environment,” she added.

Coinbase is down around 73% so far this year, while Galaxy Digital and Robinhood’s share prices have fallen 70% and 47% respectively so far in 2022.

Once the Federal Reserve stops raising interest rates and inflation starts to slow, investors will likely dip their toes back into crypto, Jablonski told Blockworks.

“Investors are taught to have well-diversified portfolios, a leveraged approach or hedge for tough times,” she said in an email. “Having a product available to cover the crypto space in the same spirit can be very beneficial for both traders and investors.”

Defiance has seven U.S.-traded ETFs with about $1.2 billion in combined assets, according to ETF.com. The largest is the Next Gen Connectivity ETF (FIVG), which has amassed nearly $1 billion in assets since launching in March 2019.

In December, the firm launched the Defiance Digital Revolution ETF (NFTZ), which invests in companies with exposure to NFTs, blockchain and cryptocurrency. Like BLOK, NFTZ has Silvergate as a top five holding, along with Marathon Digital, Draftkings, Cloudflare and Robinhood.

NFTZ, which has amassed just $6 million in assets during its time on the market, is down about 63% so far this year.

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