Bitwise Seeks SEC Approval For Crypto Index ETF

Bitwise Asset Management has filed with the SEC to transition its Bitwise 10 Crypto Index Fund into an exchange-traded fund (ETF), which would allow investors to gain indirect exposure to a diversified portfolio of cryptocurrencies, primarily Bitcoin and Ether.

Key Points

• The fund is predominantly invested in Bitcoin (75.14%) and Ether (16.42%).
• Bitwise partners with Coinbase Custody and The Bank of New York Mellon for asset management.
• The ETF will exclude low-value cryptocurrencies by requiring stable trading volume and a price above $0.01 for at least 30 days.

Bitwise Files for ETF Transition

Bitwise Asset Management has taken an important step by getting its proposed listing of its Bitwise 10 Crypto Index Fund as an exchange-traded fund (ETF) on NYSE Arca registered with the U.S. Securities and Exchange Commission (SEC). This filing, submitted on November 15, 2024, suggests a notable evolution for the fund, which has been operational since November 2017. The proposed ETF would offer investors indirect exposure to a diversified range of cryptocurrencies, with a strong emphasis on the two most significant assets: Bitcoin and Ether.

The Bitwise 10 Crypto Index Fund is structured to provide a balanced exposure to various digital currencies. The latest filing details that Bitcoin constitutes 75.14% of the fund, while Ethereum makes up 16.42%. Together, these two cryptocurrencies dominate over 91% of the index, showcasing Bitwise’s strategy to focus on established, leading assets. The remaining allocations include a selection of mid-cap and small-cap tokens, such as Solana, XRP, and Cardano, which reflect Bitwise’s intent to diversify the portfolio while maintaining a robust core.

Portfolio Composition and Standards

The fund’s diverse holdings extend beyond Bitcoin and Ether, incorporating a total of nine other cryptocurrencies, including Solana (4.30%), XRP (1.50%), and Cardano (0.70%). Smaller allocations are also made to Avalanche (AVAX), Chainlink (LINK), Bitcoin Cash (BCH), Polkadot (DOT), and Uniswap (UNI), which together comprise the remaining portion of the fund. Bitwise’s deliberate weighting indicates a calculated approach to capitalizing on both established and emerging projects within the cryptocurrency sector.

To ensure the integrity of the assets within the ETF, Bitwise has established stringent criteria for inclusion. Each digital asset must exhibit stable trading volume and the absence of known security issues, thereby maintaining a high standard for investment quality. Additionally, a significant requirement is that all assets must maintain a trading price above $0.01 for at least 30 consecutive days. This criterion serves to eliminate low-value tokens often referred to as “penny stocks,” which can be volatile and less reliable.

Custodial Solutions and Regulatory Compliance

In terms of custodial management, Bitwise is partnering with Coinbase Custody to oversee the digital assets, ensuring a secure environment for the fund’s holdings. Furthermore, The Bank of New York Mellon has been engaged to manage cash and administrative functions, emphasizing Bitwise’s focus on regulatory compliance and robust custodial practices. Such partnerships are crucial in the evolving landscape of cryptocurrency investments, where trust and security are paramount.

As the ETF landscape evolves, Bitwise’s filing includes a pivotal 90% surveillance sharing agreement requirement. This framework has previously facilitated the approval of spot Bitcoin and Ethereum ETFs, indicating that Bitwise is aligning its application with established regulatory precedents to enhance its chances of approval. This proactive approach reflects a broader trend in the cryptocurrency investment space, where firms are increasingly seeking innovative ways to access and capitalize on digital assets.

Broader Market Context and Future Developments

Bitwise’s ETF proposal comes amid a competitive environment, with other firms also pursuing similar paths in the cryptocurrency investment arena. Recently, Bitwise, alongside VanEck, 21Shares, and Canary Capital, has filed for a Solana SOL spot ETF on the CBOE. This move illustrates a growing interest in providing diverse cryptocurrency investment options to U.S. investors, further indicating the momentum behind digital asset adoption.

Solana itself is noteworthy, boasting a market capitalization exceeding $121 billion, positioning it as the third-largest cryptocurrency globally. The operational efficiency and scalability of Solana further enhance its appeal as a viable investment option. Additionally, Bitwise’s asset management prowess is underscored by its management of over $11 billion in client assets, highlighting its significant impact in the cryptocurrency investment sector.

As the landscape continues to evolve, the proposed Bitwise 10 Crypto Index Fund ETF aims to provide investors with a streamlined avenue to engage with the broader cryptocurrency market through traditional brokerage accounts. If the application is approved, it could signify a pivotal moment in increasing retail and institutional participation in cryptocurrency investments, reflecting ongoing trends toward mainstream adoption and regulatory acceptance.

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