Bitwise Launches First Cryptocurrency Index Fund

Bitwise Asset Management has launched the Bitwise 10 Crypto Index Fund (BITW), an open-ended publicly traded statutory trust available for investors who want exposure to a diversified group of cryptocurrencies including Bitcoin, Ethereum, and others.

The fund debuted Wednesday on the OTCQX, the top tier of the over-the-counter (OTC) market, with approximately $120 million in assets at just over $25 a share. By late afternoon, it was trading just under $31 a share. The fund has an expense ratio of 2.5 percent and is available for purchase through traditional brokerage accounts at Schwab, Fidelity, and other firms.

The Bitwise 10 Crypto Index Fund tracks the Bitwise market-cap-weighted index of the 10 largest crypto assets, which are screened for liquidity, custody, and other risks and re-balanced monthly, according to Bitwise. 

It is the first cryptocurrency index fund available to investors through traditional brokerages such as Schwab and Fidelity, according to the company. The similarly structured Grayscale Bitcoin Trust invests in only one cryptocurrency. 

As of of November 30, Bitcoin accounted for 75 percent of the assets of the Bitwise 10 Crypto Index Fund; Ethereum accounted for 13 percent; and XRP, Litecoin, Chainlink, Tezos, and other cryptocurrencies comprising the remaining 12 percent, according to Matt Hougan, Bitwise’s chief investment officer.

“The start of public trading for shares of BITW will make it significantly easier for financial advisers, family offices, individuals, and institutional funds to allocate to the space,” Hougan said in a statement. “We believe the fund offers a robust, one-stop solution.”

Hougan tells Treasury & Risk sister publication ThinkAdvisor that the fund is especially designed for financial advisers who would like a “safe and easy way to allocate crypto for clients that is professionally managed, secure, diversified, and (perhaps most importantly) first into their workflow.”

Bitwise has been offering the Bitwise 10 Crypto Index Fund as a private placement fund available to only accredited investors at NAV; they must hold the shares for 12 months before they can trade them on the public market.

“We thought our clients would prefer private placement funds that they could buy and see at net asset value,” but after “thousands of conversations and hundreds of in-person meetings,” Hougan said, he learned investors like the index approach but many advisers don’t like the complexity of a private placement.

He described BITW as a breakthrough that provides index strategy for advisers who can access the fund on behalf of clients through existing custody, brokerage, reporting, and modeling infrastructure.

Prior to Wednesday’s launch of BITW, Bitwise filed registration applications with the Securities and Exchange Commission (SEC) for a Bitcoin exchange-traded fund (ETF) and an indexed cryptocurrency ETF. It eventually withdrew both—the Bitcoin ETF after the SEC rejected it and the indexed ETF because it didn’t see a viable path to approval, according to Hougan.

He said Bitwise, however, will “continue to pursue a Bitcoin ETF” and plans to refile in the future. “We believe that the first crypto ETF to win approval is likely to be Bitcoin-only.”

From: ThinkAdvisor