In an unforeseen development, Bitwise recently shocked the cryptocurrency market by retracting its application for a Bitcoin and Ether Market Cap Weight Strategy exchange-traded fund (ETF). This application, initially filed with the United States Securities and Exchange Commission (SEC) on Aug. 3, has been a subject of great interest and speculation. In this article, we will delve into the reasons behind this withdrawal, Bitwise’s past ventures into ETFs, and what this means for the future of cryptocurrency investments.
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The Unexpected Withdrawal
In a surprising move, Bitwise decided to retract its ETF application despite the prevailing bullish sentiment in the market following Grayscale’s SEC victory. The filing included a statement that read, “The fund seeks to provide investors with capital appreciation. There can be no assurance that the fund will achieve its investment objective.” This statement hints at uncertainty and raises questions about Bitwise’s motivations.
Advocating for ETF Approval
Bitwise’s chief investment officer, Matt Hougan, had been a vocal advocate for SEC approval of ETFs in a recent Bloomberg interview. The proposed ETF was designed to invest in either Bitcoin futures contracts or Ether futures contracts, with the choice determined by market capitalization. Bitwise had also collaborated with ProShares to launch another ETF around the same time, further emphasizing their commitment to the ETF space.
Bitwise’s Withdrawal Statement
In the withdrawal statement, Bitwise clarified its stance: “The Trust no longer intends to seek effectiveness of the Fund, and no securities of the Fund were sold, or will be sold, pursuant to the above-mentioned Post-Effective Amendment to the Trust’s Registration Statement.” This statement effectively puts an end to the speculation surrounding the ETF’s launch.
SEC’s Delayed Decisions
Bitwise is not alone in facing delays from the SEC regarding Bitcoin ETF applications. The SEC has delayed its decision on similar applications from WisdomTree, Invesco Galaxy, Valkyrie, VanEck, BlackRock, and Fidelity. According to an SEC filing dated Aug. 31, the commission has extended the review period for spot Bitcoin ETF applications from these firms. The next set of deadlines for the SEC is in mid-October, but these may also be pushed back to the SEC’s third batch of deadlines in January or the final possible decision dates in March, April, and May of the next year.
Early Entrants to Bitcoin ETFs
Bitwise was among the early asset management firms to submit applications with the SEC for Bitcoin ETF products. In January 2019, the company proposed a BTC-backed ETF that would track the Bitwise Bitcoin Total Return Index. This index’s value is calculated based on Bitcoin’s value derived from BTC transactions on exchanges. Bitwise’s approach aimed to draw market data from multiple cryptocurrency exchanges, offering a more comprehensive representation of the cryptocurrency markets. Additionally, they planned to involve third-party custodians for physically holding Bitcoin, enhancing security and trust.
Previous Withdrawals
Bitwise’s recent withdrawal isn’t the first instance of the company stepping back from ETF ventures. Earlier this year, Bitwise submitted an application for an Ethereum Strategy ETF, designed to invest in both front-time and back-time Ethereum futures. However, the asset manager surprisingly withdrew this application just one week later, leaving the crypto community puzzled.
