Overview

• Despite higher quarterly income, WisdomTree reported a net loss of $28.3M in Q4 2022.
• Their crypto portfolio dropped in value by $235M during this period due to the extended bear market in Bitcoin and other cryptocurrencies.
• In December 2022, WisdomTree received SEC approval to add nine blockchain-enabled ETFs to its platform.

Crypto Market Decline

WisdomTree’s cryptocurrency holdings experienced a dramatic decrease in value during the fourth quarter of 2022, dropping from $163 million at the beginning of the quarter to $136 million as of December 31, 2022. This resulted in a net loss of $23 million for the company. A year prior, their crypto portfolios had been valued at $357 million, indicating an overall decline of over 62% since then. Redemptions and withdrawals from funds totaled only $4 million throughout this period.

Economic Impact

The protracted bear market in Bitcoin and other cryptocurrencies was largely responsible for WisdomTree’s losses during this time. This downturn was exacerbated by several bankruptcies within the industry such as Terra Luna and associated hedge fund Three Arrows Capital, as well as crypto lender Celsius, all going bankrupt in July 2022. Consequently, investors began withdrawing their money from WisdomTree’s funds en masse which led to further devaluation across the board.

SEC Approval

In December 2022, WisdomTree received approval from the Securities and Exchange Commission (SEC) to add nine blockchain-enabled exchange-traded funds (ETFs) to its platform; however they have thus far been unable to receive approval for a Bitcoin spot exchange-traded fund (ETF). These ETFs will allow investors greater access to digital asset markets through established financial mechanisms associated with WisdomTree’s funds.

Conclusion

Despite higher quarterly income for WisdomTree ($73M), their net loss for Q4 2022 was significant ($28M), primarily due to large declines in their crypto portfolio ($235M). The continued bear market on Bitcoin and other cryptocurrencies has caused considerable losses across many industries; however with recent SEC approvals allowing greater access through established financial mechanisms such as ETFs, there are opportunities available for those wishing to invest or trade digital assets while mitigating risk exposure within a regulated environment.