Bitwise Asset Management, a leading name in the crypto investment world, has announced that it will acquire the Osprey Bitcoin Trust (OBTC), a product offered by Osprey Funds.
This deal, which involves the transfer of $120 million in Bitcoin ($BTC) to Bitwise’s own Bitcoin exchange-traded fund (ETF) – BITB, is a significant event in the world of digital assets.
Osprey is a company based in Fairfield, Connecticut, that specialises in making digital asset investments simple and accessible. They focus on creating products that are secure, transparent, and cost-effective for investors.
The deal, which was announced in a joint statement on 27 August, means that current OBTC investors will be able to swap their OBTC shares for shares in Bitwise’s BITB fund.
This process is expected to be completed by the end of the year, assuming all conditions are met.
Osprey’s OBTC has been around since February 2021 and was originally designed to compete with the Grayscale Bitcoin Trust (GBTC).
However, GBTC eventually converted to a spot Bitcoin ETF, leaving OBTC struggling to keep up.
OBTC has faced challenges, including trading at a discount compared to the actual value of Bitcoin, which led Osprey to explore options like selling or liquidating the trust.
This acquisition by Bitwise is seen as a way to help OBTC investors by giving them access to a more stable and efficient fund, with a lower management fee of 0.20%, compared to OBTC’s 0.49%.
Performance and challenges of OBTC
Over the past three years, OBTC has not performed as well as Bitcoin itself. While Bitcoin has seen a return of 23.5%, OBTC’s return has been only about 9.5%.
This lower return has been a concern for investors, especially since OBTC shares have often traded at a discount to their net asset value (NAV).
In recent months, this discount has been between 3% and 5%, which means that the value of OBTC shares has been less than the actual value of the Bitcoin held by the trust.
The challenges for OBTC became more evident earlier this year when Osprey started considering a sale or liquidation of the trust.
This was largely because OBTC units were trading at a price lower than the value of the Bitcoin they were supposed to represent.
In fact, over the last month, OBTC shares dropped by 4.27%, while Bitcoin itself fell by 9.34%. This discrepancy highlighted the issues with OBTC’s structure and made the acquisition by Bitwise a more appealing option for Osprey.
In contrast, Bitwise’s BITB fund has been much closer to Bitcoin’s actual price movements, with a smaller decline of 8.56% over the same period.
This closer alignment with Bitcoin’s price makes BITB a more attractive option for investors looking for a fund that better tracks the value of Bitcoin.
Bitwise’s strategy
Bitwise’s acquisition of OBTC is part of its broader strategy to strengthen its position in the crypto market.
BITB, which was launched in January, has quickly gained traction, attracting $2.4 billion in assets, making it one of the largest Bitcoin spot ETFs in the United States.
Despite facing stiff competition from other major players like BlackRock and Fidelity, Bitwise has managed to secure significant investments.
This acquisition is just one of Bitwise’s recent moves to expand its influence. Earlier this year, Bitwise also acquired ETC Group, a company that operates in the European market, boosting Bitwise’s total assets under management to $4.5 billion.
However, it hasn’t been all smooth sailing for Bitwise. Recently, the company saw a $6.76 million outflow from BITB, reflecting some of the broader challenges in the crypto market.
The overall US spot Bitcoin ETF market has also experienced ups and downs, with a recent trend of net outflows after a streak of positive inflows.
Despite these challenges, the transition of OBTC investors to BITB is expected to offer them a better-managed investment option, with lower fees and a more accurate tracking of Bitcoin’s price.
At the time of press, $BTC was down by over 6%, struggling at $58,600 price level. The broader cryptocurrency market also witnessed a negative change by 7.6%.
