Bitwise files for passively managed cryptocurrency ETF

Aug 13th, 2018 | By | Category: Alternatives / Multi-Asset

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Bitwise Asset Management has filed a registration with the US Securities and Exchange Commission (SEC) for an ETF that will track the performance of leading cryptocurrency markets.

Bitwise Cryptocurrency ETF SEC

The proposed ETF will track a market-cap-weighted index of the ten largest cryptocurrency markets.

The San Francisco-headquartered firm already manages what is thought to be the world’s first professionally organized cryptocurrency index fund – the Bitwise HOLD 10 Private Index Fund – and will be aiming to bring its privately offered strategy to a broader investor base.

The new ETF will be called the Bitwise HOLD 10 Cryptocurrency Index Fund and will track the firm’s HOLD 10 Index, a market-cap-weighted index of the ten largest cryptocurrencies, rebalanced monthly.

According to Bitwise, the HOLD 10 Index captures approximately 80-85% of the total market capitalization of the cryptocurrency market. It uses a five-year-diluted market cap and other eligibility criteria meant to address challenges of the crypto space such as continuously changing supply, liquidity, trade volume concentration, and custody limitations.

Bitcoin dominates the index, accounting for nearly two-thirds (63.1%) of the total weight, while Ethereum makes up a further 15.4%. The index also provides exposure to XRP (6.8%), Bitcoin Cash (5.2%), EOS (2.5%), Stellar, Litecoin, Zcash, Dash, and Monero.

Bitwise joins a growing list of firms that are attempting to launch a cryptocurrency ETF. Other would-be providers include VanEckSolidX, Evolve Funds, and ProShares—which also filed for a short (or inverse) bitcoin ETF. Thus far none has been successful in garnering approval from the US regulator with the SEC just last month rejecting for the second time the application of the Winklevoss Bitcoin Trust, citing ongoing concerns over market manipulation.

The Bitwise proposition smells like it might potentially have more luck. Several members of its management are veterans of the ETF industry – including Matt Hougan, a former CEO of ETF.com – and it also benefits from developing track record of its existing fund.

Bitwise Global Head of Exchange-Traded Products John Hyland, commented, “We know that the current crypto ETF filings have generated a great deal of discussion and analysis within the SEC about this emerging asset class, and the SEC and its staff, to their credit, have asked for public comment on a wide range of issues relating to these products. We expect the staff of the SEC has had ongoing discussions with the investment firms making the crypto filings to date, and we look forward to having our own discussions with the SEC about the nature of our proposed offering.”

Matt Hougan, Bitwise’s Global Head of Research, added “Our research shows that an index-tracking basket of multiple cryptocurrencies behaves differently than a single coin. As such, we think both sorts of exposure need to be looked at by investors when considering the growing cryptocurrency space. Our view is that this new area has many similarities to the introduction 10 to 15 years ago of commodity ETFs. At that time, we saw the launch of single-commodity ETFs tracking gold, silver, crude oil, and other commodities, as well as ETFs tracking diversified commodity index baskets. We see a lot of similarities here.”

The filing did not reference a proposed ticker, expense ratio or listing venue.

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