Bitwise Withdraws Application for Bitcoin Futures ETF

Firm to focus on its spot bitcoin product after ProShares capitalized on first-mover advantage

article-image

Matt Hougan, Chief investment officer, Bitwise; Source: Bitwise

share

key takeaways

  • Bitwise CIO Matt Hougan cites contango and other complexities as reasons to pull the product proposal
  • The San Francisco-based fund group is content to let other firms “fight over whatever scraps are available” in bitcoin futures ETF market, president of The ETF Store says

Bitwise Asset Management withdrew its application to launch a bitcoin futures ETF, the firm’s CIO, Matt Hougan, shared in Twitter posts Wednesday, citing the complexity and costs associated with such a product.

The firm had filed for its bitcoin strategy ETF in September after US Securities and Exchange Commission (SEC) Chairman Gary Gensler said the agency would favor ETFs under the Investment Company Act of 1940 that are limited to CME-traded bitcoin futures contracts. 

ProShares launched the first bitcoin futures-based ETF in the US on Oct. 19, and Valkyrie Investments brought to market a similar offering three days later. The ProShares Bitcoin Strategy ETF (BITO) has grown to nearly $1.3 billion assets under management, while the Valkyrie (BTF) has about $60 million in assets.

“It’s an unsurprising decision and I expect additional withdrawals from other ETF issuers,” Nate Geraci, president of The ETF Store, said of Bitwise’s withdrawal. “I think a much bigger underlying factor in this decision-making is the first-mover advantage the SEC awarded to ProShares.”

VanEck, which was expected to launch its bitcoin futures ETF last month, has not yet done so. A spokesperson for the firm did not immediately respond to Blockworks’ request for comment on whether or not it still intends to launch the product. 

Global X, which filed for an ETF in August that would invest in blockchain companies and bitcoin futures, also appears nearly ready to launch, recent filings indicate. A Global X representative declined to comment.

Why the withdrawal?

Hougan noted that contango — a situation where the futures price of a commodity is higher than the spot price — is running at about 6% per year.  

“Still, we filed our application, as we thought the benefits of the ETF wrapper (convenience, access) would outweigh the contango challenge,” Hougan wrote on Twitter. “Since then, however, new challenges have emerged.”

Though Bitwise initially believed it would be possible to hold both futures and Canadian-listed bitcoin exchange-traded products, that is not currently permitted. Bitcoin futures ETFs have also “soaked up all available capacity at futures commission merchants,” Hougan added, which creates more expenses. 

“The result? Costs on top of costs, plus added complexity,” Hougan wrote in the Twitter thread. “None of this means that futures-based ETFs are bad, and BITO and BTF are thoughtful versions. But we believe most long-term investors would be better served by spot exposure, and today, there are many options for getting spot-based exposure — including other Bitwise funds.”

Bitwise offers a range of offerings, including the Bitwise 10 Crypto Index Fund, which was the world’s first crypto index fund. The company launched the Bitwise Crypto Industry Innovators ETF (BITQ) in May, which tracks a modified market-cap-weighted index of global companies supporting a crypto asset-enabled decentralized economy. The fund has $125 million assets under management.

The firm most recently filed to launch the Bitwise Bitcoin ETP Trust. Bitwise had previously filed for a physically backed bitcoin ETF in 2019, but withdrew its request in January 2020 amid SEC concerns.

As part of the latest filing, the fund group published its findings — roughly 150 pages of data-driven research that it hopes will help the product gain approval.

“The bitcoin futures ETF market has a natural cap given that investors really want a spot bitcoin ETF,” Geraci told Blockworks. “I think an issuer like Bitwise is content to focus on that bigger prize and let other issuers fight over whatever scraps are available in the bitcoin futures ETF market.”


Get the day’s top crypto news and insights delivered to your inbox every evening. Subscribe to Blockworks’ free newsletter now.


Tags

Upcoming Events

MON - WED, MARCH 18 - 20, 2024

Digital Asset Summit (DAS) is returning March 2024. What you can expect: And more! Don’t miss out on the opportunity to be in the room when the future of crypto is decided. Join us and help shape the future of our […]

recent research

Research report - cover graphics-2.jpg

Research

Base has doubled-down on its commitment to the Superchain vision, has shown early signs of success with nearly $400M in TVL, and has become home to novel dapps such as friend.tech which has seen significant traction.

article-image

Their current stance is a half-baked attempt that could stifle innovation and burden an emerging industry

article-image

Maker’s DeFi-focused “subDAO” passed a proposal activating a lending market for DAI on the Gnosis Chain

article-image

Certain creditors could be repaid sooner, with one hedge fund exec telling Blockworks it expects a payout by the end of the year

article-image

Busan is South Korea’s second largest city with a population around 3.4 million

article-image

Cyprus granted eToro crypto registration, setting the groundwork for the company to operate crypto services post-MiCa rollout

article-image

Sponsored

These are the best tools and practices you can leverage to defend against crypto market volatility