The CEO of Canary Capital, Steven McClurg, mentioned that the company’s recent filings for innovative crypto exchange-traded funds (ETFs) are a strategic move aimed at tapping into assets that show significant potential and unaddressed demand.
In a recent discussion, McClurg detailed the reasoning behind these filings, which range from the inaugural Litecoin (LTC) ETF to the first fund offering exposure to a non-fungible token (NFT) collection in the United States.
He stated:
“Larger firms like BlackRock can take greater risks. In our case, we don’t proceed unless we are confident we can successfully accomplish it. […] We are very mindful of our resources, and we want to ensure that every initiative we undertake is practical.”
Initial Litecoin Filing
On October 16, Canary Capital submitted an S-1 form to launch the first spot Litecoin ETF, setting itself apart from other firms that were filing for spot Solana (SOL) and XRP ETFs at that time.
According to McClurg, the decision was influenced by the recognition that the former chair of the US Securities and Exchange Commission (SEC), Gary Gensler, designated Bitcoin (BTC), Ethereum (ETH), and Litecoin as non-securities.
He added:
“Since the SEC had already approved Bitcoin and Ethereum ETFs, and with a few others pursuing Solana, we decided to explore opportunities we believed might get approval under the previous administration. We felt that Litecoin had favorable odds.”
Moreover, McClurg conveyed that the distribution model for the LTC token was unlikely to be viewed as a securities offering, which further justified the decision to file for the ETF.
Filing for an Outlier
On November 12, just weeks after filing for the Litecoin ETF and diverging from the prevailing trend, Canary submitted the first spot Hedera (HBAR) ETF.
This decision caught analysts off guard since HBAR did not rank among the 20 largest cryptocurrencies by market capitalization. Additionally, Hedera boasted only $111 million in total value locked (TVL) on its network as of March 27, far below that of major Layer-1 blockchains.
McClurg noted that Canary recognized HBAR as a solid token with growing demand that had not yet attracted the attention of other ETF issuers. He elaborated that the firm aims to identify such opportunities before they become mainstream trends. He remarked:
“We aim to discover the opportunities that will exist one or two years from now, because being ahead of the curve allows us to capture those flows while others scramble to file.”
He also stated that, similar to LTC, HBAR’s distribution structure was unlikely to be classified as a security, implying that the filing would likely perform well under the previous SEC administration.
Following the ETF filing, the price of HBAR surged by approximately 470% within a month, climbing from $0.065 to $0.368 on December 6, 2024, although it later retraced some of its gains due to the recent market downturn.
As of the latest update, HBAR was trading at $0.192, reflecting nearly a 200% increase since Canary’s filing in November of the previous year.
Anticipating Underappreciated Infrastructures
Another strategic shift for Canary was the filing for a spot Axelar (AXL) ETF on March 5.
This filing was based on a similar strategy of proactive positioning and surprising the crypto market, as AXL was not featured in the top 100 cryptocurrencies by market cap.
McClurg mentioned that Axelar, although not widely recognized, plays a significant role in development environments and protocol infrastructures.
He added:
“When I attended ETHDenver and other events, I conversed with various protocols. Each one was collaborating with Axelar behind the scenes. I’m serious; every protocol I engaged with is somehow working with Axelar. I found that quite remarkable—it’s a strong endorsement.”
He compared Axelar’s behind-the-scenes interoperability capabilities to earlier high-profile projects like Polkadot (DOT), suggesting that Axelar is executing more effectively.
This forward-thinking philosophy also extends to the company’s views on the broader ETF market. Canary is also the first to submit a filing for a Sui ETF, which stands as the 18th-largest cryptocurrency by market capitalization and the 8th-largest blockchain based on total value locked in decentralized applications.
McClurg highlighted a typical reactive approach among ETF issuers that often follow existing trends. He asserted that Canary’s strategy is focused on the early recognition of demand and the creation of products in anticipation of shifts in investor interest.
Integrating NFTs into ETF Structures
Canary also filed for an ETF connected to the Pudgy Penguins NFT collection. While McClurg did not go into detail about this filing, he provided insights into the company’s approach to NFT-based investment products.
He underscored his background in intellectual property investing, spanning fine arts to entertainment rights, and noted the regulatory changes that opened doors for tokenized digital collectibles.
With public indications from SEC officials stating that NFTs and memecoins will not be classified as securities, Canary recognized an opportunity to introduce NFT-based ETFs.
The firm opted for Pudgy Penguins instead of more prominent collections like Bored Apes or CryptoPunks due to its IP expansion into areas beyond digital ownership, such as physical merchandise and media content.
McClurg emphasized that, although he has never personally owned NFTs, the structure of Pudgy Penguins renders it a more viable brand from both liquidity and intellectual property perspectives.
“Pudgy Penguins have done an exceptional job in fostering their brand and intellectual property.”
He further noted that the brand’s foray into retail and animation enhances its suitability for inclusion in a regulated investment vehicle.
Prospects for Approval
As a co-founder of asset manager Valkyrie, McClurg was involved in their Bitcoin ETF, which faced longer approval timelines than anticipated. This experience has made him cautious regarding the timelines for altcoin ETFs, and he is reluctant to provide definitive predictions.
Nonetheless, McClurg expressed that he would not be surprised if up to four single-token altcoin ETFs gain approval within this year, given the improving regulatory landscape under the SEC’s new leadership.
He concluded:
“I think many of them will likely receive approval next year.”