Bitcoin ETFs Are So Passe: Bitwise Asset Management Wants the SEC to Approve a Cryptocurrency Index ETF

On Tuesday (24 July 2018), San Francisco-based Bitwise Asset Management, a pioneer in the area of cryptoasset index funds, filed an application with the U.S. Securities and Exchange Commission (SEC) for approval of an Exchange-Traded Fund (ETF) that would track a basket of ten cryptocurrencies.

The cryptoasset management firm, which was founded in 2017, currently has a "HOLD 10 Private Index Fund" (with an inception date of 22 November 2017), which the company says was the world's first cryptocurrency index fund. According to its Fact Sheet, the fund tracks the Bitwise HOLD 10 Index, "which selects the 10 largest cryptoassets based on criteria, including 5-year diluted market capitalization, trade volume minimums, concentration limits, and compliance." The portfolio is rebalanced monthly. As of 30 June 2018, the components of the index were Bitcoin (55.0%), Ethereum (20.0%), XRP (9.4%), Bitcoin Cash (6.4%), Dash (1.3%), Litecoin (2.6%), Stellar Lumens (2.3%), Monero (1.1%), Zcash (1.0%), and Ethereum Classic (1.0%).

The "HOLD 10 Private Index Fund" did not need to get SEC approval because it is only marketed to U.S. Accredited Investors.

Even though the SEC has not yet even approved a Bitcoin ETF, Bitwise must be feeling confident that the U.S. financial regulator's approval of the first Bitcoin ETF is not far away since, earier today, the company filed the registration statement for a new fund, the first publicly-offered cryptocurrency index ETF.

Matt Hougan, the company's Global Head of Research, who is a former CEO of ETF.com, told CNBC:

“We’re joining the queue... The market is professionalizing in a direction that the SEC would allow a crytpo ETF onto the market.”

The new ETF will be called the "Bitwise HOLD 10 Cryptocurrency Index Fund", and, like the existing cryptocurrency index fund, it aims "to track the returns of Bitwise's HOLD 10 Index."

John Hyland, Global Head of Exchange Traded Products at Bitwise, stated:

"We are aware that other investment firms have filed for cryptocurrency ETFs under the Securities Act of 1933, and that there continues to be interest in filing under the Investment Company Act of 1940. As best we know, all of these funds plan to offer exposure to a single coin such as bitcoin or ether. That is fine, but our proposed offering is obviously different... We know that the current crypto ETF filings have generated a great deal of discussion and analysis within the SEC about this emerging asset class, and the SEC and its staff, to their credit, have asked for public comment on a wide range of issues relating to these products. We expect the staff of the SEC has had ongoing discussions with the investment firms making the crypto filings to date, and we look forward to having our own discussions with the SEC about the nature of our proposed offering."

And Bitwise's Global Head of Research, Matt Hougan further added:

"Our research shows that an index-tracking basket of multiple cryptocurrencies behaves differently than a single coin. As such, we think both sorts of exposure need to be looked at by investors when considering the growing cryptocurrency space. Our view is that this new area has many similarities to the introduction 10 to 15 years ago of commodity ETFs. At that time, we saw the launch of single-commodity ETFs tracking gold, silver, crude oil, and other commodities, as well as ETFs tracking diversified commodity index baskets. We see a lot of similarities here."

The SEC has been reluctant to approve any Bitcoin ETFs due to various concerns, such as price volatility, lack of adequate custodial solutions, and price manipulation, but many traders/investors seem to be very hopeful of a positive decision, judging by the current Bitcoin rally, which saw Bitcoin break the $8,000 barrier (for the first time since mid May 2018) earlier today (with Bitcoin trading, at press time, around $8,242, up 6.47% in the past 24 hour period).

 

Featured Image Credit: Photo by "Andre Francois" on Unsplash.com

Craig Wright Court Ruling Causes Jitters Among Nervy Investors

Neil Dennis

Some Bitcoin investors and enthusiasts are getting uncomfortable over the actions of Craig Wright, the self-proclaimed inventor of the world's largest cryptocurrency, and are beginning to fear another major downturn in the BTC price.

Wright has failed to comply with a US Federal court order instructing him to list his Bitcoin holdings prior to December 31, 2013, and could be held in contempt of court at a hearing which follows on Friday this week.

The Florida District Court order was issued under the ongoing lawsuit filed by Ira Kleiman - representing the estate of his deceased brother David Kleiman, former business partner of Wright - who claims Wright defrauded his brother out of more than a million Bitcoins following his death in 2013.

Investors Getting Nervous

Some investors are getting nervous that Wright may be ordered to repay the Kleiman estate the Bitcoin stockpile, allegedly held in a fund called the "Tulip Trust". If such a stockpile were immediately consolidated into cash it could have a significant impact on the price.

Others fear that Wright - known for his sometimes volatile and capricious behaviour and who claims to be Satoshi Nakamoto, the mysterious inventor of Bitcoin - if piqued by the court's decision on Friday could sell much or some of his own significant holdings.

One Twitter user said:

Another nervously asked a question of BitcoinSV (Satoshi Version) - a hard fork of Bitcoin Cash in November last year promoted by Wright: "Just wondering, what does the BSV community expect to happen to the coin if Craig Wright is indicted?"

According to a court filing on May 8, Wright had named seven trustees of the Tulip Trust, including himself and David Kleiman. The filing also pointed to the existence of a second Tulip Trust. 

While it remains unclear whether both, or either Wright or Kleiman created Bitcoin, the Kleiman estate's lawyer Vel Freedman has said "it is undeniable, however, that Craig and Dave were involved in Bitcoin from its inception and that they both accumulated a vast wealth of Bitcoins from 2009 through 2013".

Freedman took to Twitter last Friday saying that Wright had not complied with the court order to list his Bitcoin holdings as of the end of 2013.

While some investors may have appeared to be showing the nerves, the price of Bitcoin remained just below $11,000 by early afternoon on Monday, up 1.3% on the day. BitcoinSV, however, was down 0.4% at $238.