The co-founder of ETF giant WisdomTree shares how the 2008 financial crisis opened his eyes to Bitcoin — and breaks down the 2 types of digital assets his crypto hedge fund is betting on

Rayne Steinberg, who co-founded WisdomTree Investments with his elder brother Jonathan Steinberg in the early 2000s, draws a direct line between the ETF industry's launch and the current push into digital assets. According to Steinberg, traditional asset managers resisted WisdomTree's low-fee, investor-friendly ETF products, and he sees the same disruption playing out in crypto. WisdomTree has since grown into a $70 billion ETF firm, and Steinberg has moved on to found Arca, a crypto asset manager that Business Insider reports manages $200 million in assets.

Steinberg attributes his interest in digital assets to the 2008 financial crisis. He said WisdomTree's stock fell to about 70 cents from roughly $10 a share during the downturn, despite no company-specific impairment, and that a hedge fund manager, Michael Steinhardt, who had previously invested in the company, helped stabilize it. The experience left him highly attentive to systemic risk. Business Insider cites St. Louis Fed data showing the Federal Reserve expanded its balance sheet by about $3 trillion between December 2007 and November 2013. Steinberg first read about Bitcoin in 2011 and was drawn to its fixed supply as a counterweight to central bank money creation. He bought Bitcoin at prices between $30 and $40 and sold all of it after it rose above $1,000 in 2013, judging the market to be overheated. He later accepted Bitcoin payments in a cannabis-related construction materials business after banks closed its accounts, which he described as a turning point in his return to the asset class.

Arca's structure has three arms. The Arca Digital Assets Funds are long-biased special-situations hedge funds targeting small- and mid-cap digital assets where competition is less intense. Led by CIO Jeff Dorman, the team uses a top-down thematic process before selecting companies and tokens. Dorman told Business Insider he favors tokens that accrue economic value when the underlying companies succeed, typically in the $100 million to $1 billion range, including asset-backed and pass-thru tokens. Holdings span centralized exchanges such as Binance (BNB), FTX (FTT) and Hxro (HXRO); DeFi names including Uniswap (UNI), SushiSwap (SUSHI), Aave (AAVE), Nexus Mutual (NXM) and THORChain (RUNE); infrastructure tokens such as Chainlink (LINK), Band Protocol (BAND) and Polkadot (DOT); fan-experience tokens Rally (RLY) and Chiliz (CHZ); and the NFT project Axie Infinity (AXS).

The firm's second arm builds blockchain-based funds. Its Arca US Treasury fund invests in short-duration government bonds and issues shares as ArCoin, which Steinberg likened to an ETF that can be transferred peer-to-peer rather than traded on exchanges. Arca also recently launched the Accredited Investor Bitcoin Trust, a passive vehicle with custody at Fidelity Digital Assets. Steinberg acknowledged the crowded market but argued that many investors still do not hold Bitcoin, and that Bitcoin is increasingly viewed as digital gold and an inflation hedge, though he said adoption is still early.