Three New Funds that Give You Exposure to the Crypto Ecosystem

Plus, supporting a divorcing child without sacrificing your own financial security

Ric Edelman: It's Thursday, November 21st. There's been a lot of talk about crypto lately for all the right reasons. I mean, getting a lot of questions about investing in crypto, but not directly into bitcoin or other digital assets. People are wondering are there other ways to do it?

The answer is yes, and I'm gonna tell you about that in a minute. But first I wanna respond to a question that I got from Kathy. She's in Nielsville, Minnesota.

Kathy: “I have an adult child going through a divorce. He wants to keep his house, but he'd have to pay his wife $250,000 for her half of the equity. They have a four year-old child. He made some mistakes recently and took money from his 401(k). Consequently, he doesn't have the money to pay his wife, and so he's asking me if I would be willing to give him the $250,000.

I am single. My retirement savings is approximately $1.2 million. I don't have long-term care insurance. I am concerned that gifting that much money to my son would put me in an uncomfortable financial position. I love him very much, but I am worried about my own security. What are your thoughts?”

Ric Edelman: Kathy, I really do appreciate your situation very much. You're levelheaded about this. You are trying to balance your desire to support your son and your grandchild against your own need for financial preservation and security.

And I certainly understand your son's situation as well. He wants to keep the house that his young child is familiar with and minimize the disruption on that extent. But the fact is that your son is going through a major life change. It is unrealistic given his situation that he tried to hang on to that house.

If he's got to give his ex $250,000, which is her half of the equity, that means he's got $250,000 in equity as well. And he ought to use that money as his launch off point for his new life. And that means selling the house, giving his half to his ex and he takes the other half using it as a down payment toward the purchase of a new home or even renting for a while. Nothing wrong with that as he figures out his next moves, because he's got to recognize it's not merely you giving him quarter of a million dollars that he can use to pay off the ex. He's got to figure out whether he can afford to.

Keep that half-million dollar home, which is frankly probably worth more than a half a million. If that's all the equity is, can he afford that house, the maintenance, repairs, property taxes, insurance, etc.? He may need to go to lower cost housing. Otherwise, he'll not only be asking you for a quarter of a million dollars right now, he'll be asking you for more money later to help him deal with the cost of maintaining that property.

So, I think you should give him a little bit of tough love. Express yourself very clearly, very quietly, but very seriously. Convey relentlessly that you do love him and your grandchild and you want to help him get through this very difficult period of time. But that doesn't mean a handout of a quarter of a million dollars when it frankly might not be in his long term best interest, let alone not being in your best interest.

Help him understand that you and he need to work together to strike a balance between his financial future, as well as your own. Because if you give him so much money that it wrecks your financial security, you'll be turning to him for financial support. And who knows if he'll be able to provide it, given the uncertainty of his short-term future.

So, I think it's best that you work with him to figure out an alternative methodology for him to establish a new life for him and his child.

Now let me tackle this question of crypto now for you. A lot of folks are interested in bitcoin, Ethereum, Solana, and other digital assets because of the incredible run-up in price as a result of Donald Trump's re-election.

But at the same time, people are saying they don't really want to buy bitcoin directly. Is there an alternative approach? And there is. It's called “picks and shovels”. This colloquial name emanates from the California gold rush of the 1800s when in the famous story, everybody ran out to “go west young man” kind of a thing and make their fortune by digging for gold.

And among the people who did that was Levi Strauss. But Strauss didn't dig for gold. Instead, he sold the gold-miners blue jeans, and along the way, he became the wealthiest of them all. That kind of a notion is replicated today on Wall Street in many, many cases, most recently in the world of crypto. Instead of buying bitcoin, invest in the stocks of companies that are mining bitcoin or that are providing crypto exchanges that facilitate the ability for people to buy it. Or crypto banks, which provide the opportunity for crypto companies to handle their financials.

The list goes on and on of companies that are involved in the development, distribution and deployment of the crypto and blockchain industries. In fact, let me give you three examples of new ETFs that are issued by SSGA, State Street Global Advisors.

State Street, of course, is a very well-known name in the financial industry. They're one of the largest asset managers in the world, multi-trillion dollar company. And they've recently launched three, count them three, “picks and shovels” crypto ETFs:

• SPDR® Galaxy Digital Asset Ecosystem ETF (DECO)
• SPDR® Galaxy Hedged Digital Asset Ecosystem ETF (HECO)
• SPDR® Galaxy Transformative Tech Accelerators ETF (TEKX)

Let me tell you a little bit about all three of these. These ETFs invest in companies that stand to benefit from the growing adoption of the blockchain and crypto industries. They have exposure through crypto ETFs and futures as well.

We're talking actively managed funds. They're managed by Galaxy Asset Management, one of the oldest and largest crypto asset managers. Galaxy lends State Street it's deep understanding of the digital asset ecosystem and expertise in the blockchain technology industry to actively manage these portfolios. (DECO), and other two are new. They launched in September. The expense ratio of these funds is right in line with lots of other actively managed funds. The timing for these funds? Pretty good. The emergence of blockchain technology represents a fundamental shift in commerce, just like the internet did in the 1990s and mobile phones did in the 2000s.

And now, with Donald Trump taking office, and him being a huge crypto proponent, unlike Joe Biden and Kamala Harris, this new digital infrastructure technology is about to revolutionize the financial industry with innovations like decentralized finance (DeFi), and tokenized assets. It's going to be a big change to how businesses operate, interact, and provide services.

All this is fueling greater institutional adoption and continued government acceptance, not just here in the U. S., but all around the world. And I really think this is going to create a flywheel effect that's going to broaden the digital asset ecosystem. And that's why State Street launched these funds.

The SPDR® Galaxy Digital Asset Ecosystem ETF (DECO) is really something to look at. Why would State Street partner with Galaxy to do this? Why wouldn't State Street do it itself? I mean, after all, it's one of the biggest asset managers in the world.  But State Street acknowledged that they don't have a lot of in-house expertise about this new-fangled asset class called crypto.

So, rather than trying to build that institutional knowledge themselves, they made a smarter move. They partnered with Galaxy to manage these funds for them. You get State Street's name and financial backing. And their deep distribution system. And you also get Galaxy’s deep knowledge and experience in crypto.

Yeah. Galaxy has been in crypto since 2018. That's really old in the crypto world. They serve the digital asset ecosystem end-to-end, meaning they invest in bitcoin mining, staking services, institutional trading and lending, investment banking, tokenization and asset management. They pioneered the creation of a robust operating environment that's tailored for digital asset investment services and strategies. And they offer investors access to the growing digital economy through passive, active, and venture strategies.

This is an increasingly big marketplace. There's blockchain technology that can store record and validate transactions. There's cryptocurrencies like bitcoin and Ethereum. There's tokenized money like stablecoins. There's tokenized assets like NFTs (non-fungible tokens), as well as tokenized funds. So, Galaxy manages DECO by combining both top-down and bottom-up approaches.

They first identify crypto market dynamics, then they figure out what the blockchain industry trends are, and then they identify relative value opportunities, and they do this globally. We're talking about investing in companies that are involved in cryptocurrencies, bitcoin mining and validating, crypto-related financial services like exchanges, custodians and payment processors, blockchain software and hardware manufacturers, and blockchain technology utilizers.

To give you an idea of the kinds of companies that this fund invests in: Cipher mining, Riot platforms, Hut 8, MicroStrategy, Micron Technology, Taiwan Semiconductor, Vertiv Holdings, even the Fidelity Wise Origin Bitcoin Fund ETF for a direct bitcoin exposure. Yeah, there's no question that crypto is a very dynamic asset class. It's got a lot of volatility. That creates opportunities for nimble investors.

That's why Galaxy has a strategy of dynamically allocating the money in the fund in response to changing market conditions to optimize returns while managing risk. For example, at any given moment, the portfolio might be tilted away from direct crypto exposure. On the other hand, it can invest up to 25 of its assets directly into crypto via ETFs, ETPs, and futures.

And then there's HECO. Separate from DECO. HECO is the SPDR® Galaxy Hedged Digital Asset Ecosystem ETF. It does everything that DECO does. Plus, it adds a hedging strategy to protect the fund from potential loss. It does this by buying protective put options and simultaneously buying out of the money call options. If you're familiar with these kinds of detailed strategies, you know the benefits of them.

And then finally is the new SPDR® Galaxy Transformative Tech Accelerators ETF. The symbol is (TEKX).  Galaxy applies macroeconomic, fundamental, quantitative, and technical analysis to figure out the macroeconomic and financial conditions. And at the same time, surveying the entire marketplace. In the end, this lets them decide which companies to invest in. Those semiconductors, energy suppliers, data centers, bitcoin miners, cloud computing companies, and so on.

You can use these funds in a variety of different ways. With DECO, you can complement your existing crypto holdings to enhance your diversification, or even use it as a starting point if you like the idea of investing in blockchain technology, but you don't want to own crypto directly.

With HECO, you can get risk managed exposure to digital assets and blockchain companies with a focus on reducing the volatility that DECO might offer.

And finally, there's TEKX. That lets you complement your existing technology sector exposure so you can diversify your growth allocations beyond your traditional approach.

Three pretty cool ideas. All coming from a couple of the biggest names in the industry, State Street and Galaxy. You want to learn more about these? Just go to ssga.com link to it's in the show notes or ask your financial advisor.

If you like what you're hearing, be sure to follow and subscribe to the show, wherever you get your podcasts, Apple, Spotify, YouTube, and remember leave a review on Apple podcasts. I read them all. Never miss an episode of The Truth About Your Future. Follow and subscribe on your favorite podcast app.  

I'll see you tomorrow.

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Links from today’s show: 

State Street Global Advisors (SSGA) https://www.ssga.com/us/en/intermediary

SPDR® Galaxy Digital Asset Ecosystem ETF (DECO) https://www.ssga.com/us/en/intermediary/etfs/spdr-galaxy-digital-asset-ecosystem-etf-deco

SPDR® Galaxy Hedged Digital Asset Ecosystem ETF (HECO) https://www.ssga.com/us/en/intermediary/etfs/spdr-galaxy-hedged-digital-asset-ecosystem-etf-heco

SPDR® Galaxy Transformative Tech Accelerators ETF (TEKX) https://www.ssga.com/us/en/intermediary/etfs/spdr-galaxy-transformative-tech-accelerators-etf-tekx

12/9 Webinar - What the Election Results Mean for Crypto: https://dacfp.com/events/what-the-election-results-mean-for-crypto

12/10 Webinar - The Retirement Revolution: ETF Solutions for Modern Retirement Planning: https://www.thetayf.com/pages/the-retirement-revolution-etf-solutions-for-modern-retirement-planning

11/13 Webinar Replay - An Innovative Way to Generate Income in a World of Declining Rates: https://www.thetayf.com/pages/november-13-2024-an-innovative-way-to-generate-income

10/9 Webinar Replay - Crypto for RIAs: Yield, Staking, Lending and Custody. What’s beyond the ETFs? https://dacfp.com/events/crypto-for-rias-yield-staking-lending-and-custody-whats-beyond-the-etfs/

Certified in Blockchain and Digital Assets including Crypto Taxation Course/Webinar: https://dacfp.com/certification/

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