Newsletter: Brands in Web3 & Web3 in Brands

Welcome to Edition #13 of “Brands in Web3 & Web3 in brands“, your regular dose of the latest news from the blockchain, crypto, and Web3 space, curated to provide unique marketing and brand strategy insights with a pinch of spice. 

This week: One story dominated the cryptosphere as the US SEC approved spot Bitcoin ETFs for the first time. But how are finance firms branding their spot ETF offerings? VanEck’s promotional video ranges from the bizarre to the ridiculous, while Bitwise has adopted a saner approach.

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Spot On! SEC Approves 11 Bitcoin ETFs

After much speculation and courtroom drama, it’s been a massive week for Bitcoin, as the US financial regulator, the SEC, finally gave the green light to 11 spot Bitcoin ETFs - the first of their kind. This means that US customers can now buy Bitcoin like they buy stocks on standard trading platforms, without having to deal with wallets, crypto exchanges or derivatives. 

This is potentially a huge deal for Bitcoin, as it opens the door to millions of new US investors who can now get a piece of the action much easier. Spot ETFs are the real deal, in the sense that they are actually underpinned by BTC, unlike the previous ETFs approved in the US that were based on futures. 

The news sent Bitcoin soaring to $47,500, with analysts at Standard Chartered bank projecting inflows of $50-100 billion this year alone. After a year when the only crypto acronym on people’s lips seemed to be SBF, the SEC decision on ETFs provides a very welcome change of tone.

Race to the bottom on fees

The ETF race was fierce, with many providers frantically slashing their fees this week to attract more customers. Crypto-native asset manager Bitwise went lowest, eventually reducing its fee to 0.20%, closely followed by Ark Investments/21Shares at 0.21% and VanEck, BlackRock and Fidelity at 0.25%. Many of them were also waiving the fee entirely during an introductory period of 6 to 12 months.    

But in addition to fees, liquidity will also be a key consideration for investors, particularly those with a more short-term focus who want to retain the flexibility to move in and out of products freely. This may be why Grayscale is risking a much higher 1.5% fee, as unlike its competitors, it is converting an existing fund that already has volume into an ETF.

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Some truly bizarre marketing strategies

The providers that will come out on top of this race will need to combine competitive fees with a credible brand. We are already seeing some of the newly approved operators launch campaigns seeking to lure new investors, with both VanEck and Bitwise publishing posts promoting their ETF offerings recently. Let’s start with VanEck, which posted this video at the end of December: 

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Despite its short duration, there is a lot to unpick here. The first thing that confuses me off the bat is why a traditional financial company that was founded in 1955 is trying to pitch itself as a cypherpunk with the tagline “Born to Bitcoin”. How they think this is a credible tagline is beyond me. You guys were born when Dwight Eisenhower was president — you were born to jitterbug. 

Looking more closely at the video itself, it doesn’t seem like VanEck knows when crypto was born either. It sets out to be an aspirational lifestyle video of a cool and empowered Bitcoin investor, but some of the details are just bizarre. The scene is initially set in a room with a 1980s CRT monitor, a bag of coffee called “Bitcoiners”, a book about the 70s rock band Steely Dan, and what looks like a copy of The Times of London on the table. 

Then it cuts to the silhouette of a guy wearing a Steve Jobs turtleneck and earrings strolling along the roof of a building at dusk. The dark lighting adds an air of mystery. Who is this Steely Dan-loving, retro computer enthusiast who reads a conservative British newspaper you might ask? It’s definitely not a personality type I have ever encountered in over a decade in the crypto space. But more importantly, what on earth does any of this have to do with Bitcoin ETFs?

In comparison to the low bar set by VanEck, the promotional post that Bitwise published on its X account looks like a decent effort. Kudos to the copywriter, who has had fun with the name Bitwise to create a catchy typographic ad. It has the look and feel of a classic print ad, which lends an extra hint of class to Bitwise, which is a crypto-first operator now competing with some of the biggest names in finance. 

However, when we think about the message — an ETF backed by crypto specialists — it gets a bit murkier. What benefit does an ETF backed by a crypto specialist actually bring? Is the whole raison d'etre of a regulated ETF not that you can trust it? If so, what difference does crypto expertise make? It will not make the value of Bitcoin any higher and your investment would presumably be equally secure with a “non-specialist” ETF provider like BlackRock. As there is only one asset to invest in, you likely don’t need advice either. There could well be a benefit I am not thinking of, but it certainly is not obvious from this ad. 

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Back to basics: What is the true value of a spot ETF?

Going forward, ETF providers will need to do more to explain the true advantages of their product in their marketing. Spot ETFs provide exposure to Bitcoin, without needing to invest directly in the underlying asset, while exactly mirroring its value unlike futures or derivatives. They are fully regulated and can be traded through the largest and most established trading platforms, which minimises counterparty risk at a time when FTX is still on a lot of people’s minds. They enable traditional investors to allocate a portion of their portfolio to a relatively volatile asset with upside potential, without needing to open a separate brokerage or crypto exchange account. 

When brainstorming their next ETF campaigns, providers should think about how they can communicate these benefits in a clear and compelling way. 

And if you are a traditional finance company, please don’t try to pitch yourself as a cypherpunk. I am sorry, but no matter how hard you try, we just aren’t going to buy it.