Bitwise launches new DeFi fund, offering exposure for accredited investors

Quick Take

  • Crypto asset manager Bitwise says it has launched the first DeFi index fund
  • The nearly $1 billion firm’s new fund – The Bitwise DeFi Crypto Fund – offers accredited investors exposure to tokens like UNI and Aave

Count this as a potential sign that the institutional investment world is cozying up to the burgeoning decentralized finance market. 

Crypto asset manager Bitwise announced Wednesday the launch of the Bitwise DeFi Crypto Index. The new fund will provide a vehicle for accredited investors to make a diversified bet on DeFi through the structure of a security, which might make them more comfortable with the nascent market known for its hacks and rug pulls. 

The DeFi market – which spans lending, exchange, and insurance protocols – has grown at a fast-clip over the last year, with the notional value locked in such protocols soaring from under $1 billion at the beginning of 2020 to $56 billion this month.

Indeed, the market has even captured the attention of Wall Street heavy hitters like AllianceBerstein, which penned an analyst note saying that DeFi protocols "have begun recreating financial services, including lending/borrowing, exchanges, derivatives, prediction/betting markets, and more."

As for Bitwise's new fund, the firm has been prioritizing its launch since the roll-out of its Bitwise 10 product on the public over-the-counter markets at the end of December.

"It's been hard not to notice and get excited by what's been happening in the DeFi space," said Bitwise chief investment officer Matthew Hougan. "There's a huge amount of venture capital pouring into the space, a whole lot of developer activity moving into this space."


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The fund is launching with a small amount of seed assets with subscriptions occurring twice a week. Initially, the constituents of the fund will include Uniswap, Aave, Synthetix, Maker, Compound,  UMA, Yearn.Finance, 0x, and Loopring. 

Inclusion into the fund is predicated on a number of factors, according to Hougan, 

"Effectively the big question is 'does this compete directly with a business in the traditional financial industries sector,'" Hougan said. 

There also needs to be evidence of real use of the crypto-asset as well as be supported by top tier custodians and exchanges. 

In the long-term, Hougan isn't hundred percent certain whether the product will be quick to take-off, but he said that ultimately it could follow a similar path as BITW and trade over-the-counter for institutions and retail alike.

"It took us a long time to educate our audience on the Bitwise 10," he said. "The market cap is a tiny fraction but the education curve might be faster."

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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Frank Chaparro is Host of The Scoop podcast and Director of Special Projects. He also writes a biweekly newsletter. Chaparro started his career at Business Insider, where he specialized in the intersection of digital assets and Wall Street, market structure, and financial technology. Soon after joining Business Insider out of Fordham University, Chaparro was interviewing top finance and tech executives, including billionaire Mark Cuban, “Flash Boys” star Brad Katsuyama, Cboe Global Markets CEO Ed Tilly, and New York Stock Exchange President Tom Farley. In 2018, he become a sought after reporter in the crypto world, interviewing luminaries such as Tyler Winklevoss, the cofounder of Gemini, Jeremy Allaire, the CEO of Circle, and Fundstrat head Tom Lee. For inquiries or tips, email [email protected].