Market Overview

Bitwise Asset Management Enters Bitcoin ETF Fray

Bitwise Asset Management Enters Bitcoin ETF Fray

Bitwise Asset Management, the fintech company first privately-offered cryptocurrency index fund, said Tuesday it filed plans with the Securities and Exchange Commission to launch the Bitwise HOLD 10 Index Cryptocurrency Fund.

If approved, the Bitwise HOLD 10 Index Cryptocurrency Fund would be the first publicly-offered cryptocurrency index exchange-traded fund.

What Happened

To date, U.S. regulators haven't approved exchange traded funds linked to bitcoin or any other digital currency. However, positive momentum for bitcoin ETFs is increasing with the VanEck SolidX Bitcoin Trust ETF (XBTC) being considered by the SEC. Recent reports citing sources within the SEC and the Commodities Futures Trading Commission suggest regulators could approve a bitcoin ETF before the end of 2018.

“A registration statement relating to the shares of the Bitwise HOLD 10 Cryptocurrency Index Fund ETF has been filed with the Securities and Exchange Commission (SEC) but has not yet been declared effective,” according to a statement from San Francisco-based Bitwise. “The shares of the ETF may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective.”

Why It's Important

If approved, the Bitwise HOLD 10 Cryptocurrency Index Fund will track Bitwise's HOLD 10 Index, a cap-weighted collection of the 10 largest digital currencies by market value representing about 80 percent of the cryptocurrency space's total market capitalization.

Bitcoin, the largest digital currency by market value, commands 59.1 percent of the index while Ethereum checks in at 17.7 percent, according to Bitwise data. Ripple and Bitcoin Cash combine for 13.8 percent of the index.

Previous efforts for bitcoin ETFs have been linked to futures and derivatives or physical holdings of the cryptocurrency. Bitwise sees parallels between the state of the cryptocurrency ETF space today and the commodities ETF arena 10 to 15 years ago when single commodity as well as index-based products first burst onto the scene.

What's Next

That's up to regulators. While there's momentum for bitcoin ETFs, if such products aren't approved this year, the process could lag well into 2019. For now it's just speculation, but the Bitwise HOLD 10 Cryptocurrency Index Fund being linked to an index, which is the traditional ETF model, could work in its favor in terms of approval.

“The index uses 5-year diluted market capitalization instead of straight market cap, several eligibility criteria including trade volume and concentration histories, composited prices, circulating supply, multiple data sources, monthly rebalancing, and specific policies for rare events like hard forks to protect the integrity of it’s basket,” according to Bitwise.

Since January 2017, the index has handily outperformed bitcoin, according to issuer data.

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