Bitwise Asset Management has stepped into the spotlight with a new proposal for a joint Bitcoin-Ethereum exchange-traded fund (ETF).
The filing comes as interest in crypto ETFs continues to grow, signalling increasing acceptance of cryptocurrency investments among traditional investors.
Bitwise’s proposed ETF aims to simplify crypto investing by allowing people to gain exposure to both Bitcoin ($BTC) and Ethereum ($ETH) without owning the assets directly.
If approved by the US Securities and Exchange Commission (SEC), the ETF will be listed on the NYSE Arca exchange. Bitwise has not yet revealed the fund’s ticker symbol.
This ETF takes a straightforward approach. It will passively hold both Bitcoin and Ethereum, tracking their combined market value.
Unlike some ETFs that rely on derivatives or complex trading strategies, this fund is purely focused on owning the assets and following their price movements. “The trading will begin as soon as practicable after approval”, Bitwise noted in its filing, though no official start date has been provided.
To ensure accurate pricing, the ETF will use benchmarks from CF Benchmarks Ltd. These benchmarks aggregate pricing data from major cryptocurrency platforms such as Coinbase, Kraken, and Gemini.
The Trust’s net asset value (NAV) will be calculated daily based on this data, providing transparency for investors.
Shares in the ETF will be bought or sold in blocks of 10,000 units, called “Baskets”. Each Basket will contain specific amounts of Bitcoin and Ethereum, adjusted regularly to reflect fees and market changes.
Bitwise has confirmed an annual management fee for the fund but has not disclosed its exact rate yet.
Backing from trusted institutions
To operate the ETF efficiently, Bitwise has partnered with leading financial institutions.
The Bank of New York Mellon (BNY Mellon) will oversee administrative tasks such as tax reporting, accounting, and managing the fund’s cash flow. This ensures a smooth process for investors buying and selling shares.
Foreside Fund Services will handle marketing and compliance, ensuring promotional materials meet regulations set by the SEC and FINRA.
Initially, transactions within the ETF will be settled in cash. However, Bitwise has hinted that in the future, the fund may allow transactions using Bitcoin and Ethereum directly, making it more flexible.
To get the fund off the ground, Bitwise Investment Manager, a subsidiary of the parent company, is providing initial capital. This seed money will be used to purchase Bitcoin and Ethereum before the ETF starts trading.
Once approved, shares will be available to the public through regular brokerage accounts.
Changing regulations and industry competition
The SEC has not yet made a decision on Bitwise’s proposal, but regulatory changes could play a major role in the outcome.
Current SEC Chair, Gary Gensler, is expected to step down in January 2025, and his replacement could bring a different perspective on cryptocurrency regulation. This change could impact how quickly the SEC approves new crypto ETFs.
Bitwise’s move comes during a busy time for crypto ETFs. On 21 November, the firm also filed for a spot Solana ETF, while other companies have proposed ETFs tied to cryptocurrencies like Hedera and $XRP.
Meanwhile, competitors are making efforts to stand out. VanEck, a well-known player in the ETF space, recently extended fee waivers for its Bitcoin ETF to attract more investors. The fund currently manages $1.22 billion in assets.
However, VanEck faces tough competition. BlackRock’s iShares Bitcoin Trust (IBIT) dominates the market with $46 billion in assets under management.
Despite occasional dips, such as a $123 million net outflow from a Bitcoin spot ETF on 26 November, these funds continue to show resilience.
Analysts believe that Bitcoin ETFs could reach $100 billion in total net assets by the end of the year, reflecting strong investor confidence.
Earlier this year, the SEC approved spot Bitcoin ETFs in January, followed by spot Ethereum ETFs in May. These milestones suggest the SEC is becoming more open to cryptocurrency investment products.
However, it remains to be seen how the new leadership at the SEC will handle Bitwise’s filings and others in the pipeline.
