Bitwise Plans New Crypto ETF Amid Market Collapse

Bitwise Asset Management, which runs a crypto exchange-traded fund that has lost 85% over the past year, is showing its confidence in digital currencies with an application for a new bitcoin futures ETF. 

In a filing last week with the Securities and Exchange Commission, Bitwise said the Bitcoin Strategy Optimum Yield ETF (BITC) aims to provide exposure to bitcoin futures contracts and investments in short-term debt securities.  

Direct investments in bitcoin by ETFs isn’t currently permitted. The only contracts the fund’s portfolio expects to hold are those traded on or according to the rules of the Chicago Mercantile Exchange. 

Bitwise is launching the fund despite the decline of its Bitwise Crypto Industry Innovators ETF (BITQ), which a year ago was trading for about $30 a share and today was at $4.10. This year has seen spectacular flameouts of crypto heavy hitters like FTX, Terraform Labs and Voyager, while cryptocurrency lender BlockFi declared bankruptcy Monday.  

Bitcoin itself has dropped 65% in 2022, as investors’ skepticism about the future of digital currencies spreads. 

Still, investors are taking advantage of the tumbling market. Cathie Wood’s ARK Invest recently bought more than $60 million in crypto-related stocks, and digital asset manager Valkyrie Investments committed to stay in the sector, despite laying off 30% of its workforce. Valkyrie Investments’ Chief Investment Officer, Steven McClurg, recently told ETF.com that the drop in the crypto market is a short-term concern, and institutional investors, as well as broker-dealers, remain interested in digital currencies.

The new fund filing comes almost a year after the first bitcoin futures ETF was launched in the United States by ProShares Trust, the ProShares Bitcoin Strategy ETF (BITO), which actively manages a portfolio of front-month CME bitcoin futures. Instability in the crypto sector has caused BITO to drop by 72.47% so far this year, according to ETF.com data. 

The BITC filing states that the ETF will invest in bitcoin futures contracts exclusively through a subsidiary, and that the fund’s investment in the subsidiary won’t surpass 25% of its total assets The fund is expected to list on the NYSE Arca, once approved by the SEC. 

Management fees and expense ratios for the fund were not disclosed. 

San Francisco-based Bitwise, whose BITQ has $43.5 million in assets, declined to immediately comment to ETF.com. The company also manages the Bitwise 10 Crypto index fund, which is closed to new investments. 

Contact Zoya Mirza at [email protected]