Canary Capital CEO Steven McClurg said the firm’s recent “out-of-the-box” crypto exchange-traded fund (ETF) filings are a calculated approach to engage with assets that have potential and unmet demand.
In a recent interview with CryptoSlate, McClurg explained the rationale behind the company’s filings, ranging from the first Litecoin (LTC) ETF to the first fund to give exposure to a non-fungible token (NFT) collection in the US.
He explained:
“If you’re a big shop like BlackRock, you can afford to take chances. If you’re a smaller shop like us, we don’t do anything unless we really feel like we can actually get it done. […] We’re pretty conscientious about our time and money, and we want to make sure that everything we’re doing is something that is viable.”
First Litecoin filing
On Oct. 16, Canary Capital filed an S-1 form to list the first spot Litecoin ETF, diverging from the trend of filings for spot Solana (SOL) and XRP ETFs by other firms at the time.
McClurg explained that the decision came after Canary realized that former US Securities and Exchange Commission (SEC) chairman Gary Gensler named Bitcoin (BTC), Ethereum (ETH), and Litecoin as non-securities.
He added:
“Since the SEC had previously approved Bitcoin and Ethereum ETFs, and we saw a couple of people file for Solana, we decided to look at opportunities that we believed would potentially get approval under the old administration. And we believe that one [Litecoin] had very good odds.”
Additionally, McClurg said the firm believed at the time that the LTC token distribution model was unlikely to be classified as a securities offering, strengthening the decision to file for an ETF.
Filing for an outlier
On Nov. 12, less than one month after filing the first Litecoin ETF and diverging from the trend, Canary filed the first spot Hedera (HBAR) ETF.
Analysts were surprised by the decision since HBAR is not part of the 20 largest cryptocurrencies by market cap. Additionally, Hedera only has $111 million in total value locked (TVL) on the network as of March 27, far lower than major Layer-1 blockchains.
McClurg said that Canary filed for the ETF because it identified HBAR as a sound token with demand that had not come under the radar of other ETF issuers. He added that the firm’s goal is to find such opportunities before they become industry trends. In his words:
“We want to find the opportunity that exists one year from now, two years from now, because if we are early to the punch, then we will get those flows when everybody else is scrambling to file.”
McClurg also said that Canary believed that like LTC, HBAR’s distribution was unlikely to be classified as a security and the filing would “do well” under the former SEC regime.
The price of HBAR spiked roughly 470% within a month after the ETF filing, jumping from $0.065 to $0.368 on Dec. 6, 2024, before giving up some of its gains amid the recent market downturn.
HBAR was trading at $0.192 as of press time, up nearly 200% since Canary’s filing in November last year.
Early bets on underrecognized infrastructures
Another of Canary’s moves diverging from major trends was the filing for a spot Axelar (AXL) ETF on March 5.
The filing follows a similar thesis of preemptive positioning and has also surprised the crypto market since AXL is not among theough to be included in the top 100 cryptocurrencies by market cap.
McClurg said that Axelar has received little mainstream attention but it is widely integrated into developer environments and protocol infrastructure.
He added:
“I was at ETHDenver, I was at a couple of other places, and I started talking to protocols. Every one of them is working with Axelar behind the scenes. I do mean every single protocol I talk to is working with Axelar in some way. And I thought that was quite interesting, that’s pretty high praise.”
He contrasted Axelar’s behind-the-scenes interoperability functionality with earlier high-visibility projects like Polkadot (DOT), noting that Axelar appears to be executing more effectively in practice.
This forward-looking approach extends to the firm’s views on the broader ETF landscape. Canary is also the first issuer to file for a Sui ETF, the 18th-largest crypto by market cap and the 8th-largest blockchain by total value locked in decentralized applications.
McClurg criticized a common reactive strategy among ETF issuers, which tends to follow trends already underway. He said that Canary’s model instead focuses on early identification of demand and the development of products in anticipation of shifting investor focus.
Incorporating NFTs into ETF structures
Canary also filed for an ETF tied to the Pudgy Penguins NFT collection. While McClurg declined to elaborate on that filing, he offered context around the company’s thinking on NFT-based investment products.
He emphasized his background in intellectual property investing, ranging from fine art to entertainment rights, and the shift in regulatory stance that opened the door for tokenized digital collectibles.
Following public statements from SEC officials indicating that NFTs and memecoins are not to be classified as securities, Canary saw a viable path to introduce NFT-based ETFs.
The firm chose Pudgy Penguins over other collections, such as Bored Apes or CryptoPunks, due to its IP expansion beyond digital ownership, including physical merchandise and media content.
McClurg stressed that while he has never personally held NFTs, Pudgy Penguins’ structure made it a more viable brand from a liquidity and IP standpoint.
“[Pudgy Penguins have] done a better job of developing their brand and IP.”
He added that this expansion into retail and animation supports the asset’s inclusion in a regulated investment vehicle.”
Timeline for approval
As the co-founder of asset manager Valkyrie, McClurg worked on the firm’s Bitcoin ETF, which was approved later than expected. He said the experience has made him cautious about the timeline for altcoin ETFs and he is hesitant to make a firm prediction.
However, McClurg said he wouldn’t be surprised if up to four single-token altcoin ETFs are approved this year considering the improving regulatory landscape under the SEC’s new leadership.
He concluded:
“I think a lot of them will probably be approved next year.”
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