Bitwise Asset Management, one of the leading digital asset managers, announced that the company has had to withdraw its application to the United States Securities and Exchange Commission (SEC) that would have let investors gain exposure to a crypto-based exchange traded fund (ETF). The ETF in question comprised of the two most dominant crypto coins, Bitcoin and Ether. This article details the circumstances surrounding the application withdrawal and the implications of the decision on the market.
1. Bitwise Withdraws Market Cap ETF Application
Bitwise Asset Management, an innovative index fund provider, submitted a new ETF application to the US Securities and Exchange Commission (SEC). The new ETF is designed to track the Bitwise 10 Cryptocurrency Market Index (Bitwise 10), which seeks to provide investors with exposure to the 10 largest digital assets by market capitalization.
The ETF and Its Impact
Bitwise’s ETF application aims to address some of the common problems tied to trading digital currencies. Interested investors may find that buying digital currencies on their own carries high purchase costs, is complex, and includes multiple security risks. Funds such as the proposed ETF can bring liquidity and convenience to digital currency investments.
Bitwise 10 is a market cap-weighted index tracking the 10 largest coins by market cap after rebalancing every month. The ETF would allow investors to invest in all 10 digital currencies through one product and benefit from instant diversification. Holdings include Bitcoin, Ethereum, Bitcoin Cash, Litecoin, Ripple,
EOS, Monero, NEO, Dash, and Zcash.
What’s Next?
- The SEC has requested additional information from Bitwise, which the firm is planning to submit soon
- There is no timeline yet on when the SEC’s decision could be made
- The exchange-traded fund will track the Bitwise 10 index.
If passed, the ETF would provide retail investors with a simpler and safer way to invest in digital currencies. With a wide scope of potential uses, the ETF could be the next step for increasing mainstream adoption and pushing forward the digital asset industry.
2. What Drove Bitwise to Withdraw?
Bitwise, which once filed for a Bitcoin ETF, revealed the strategy shift – namely it’s withdrawal from filing – in a recent blog post.
First of all, the company cited a lack of “positive regulatory momentum” as a primary driver for the shift in their strategy. Bitwise noted the U.S. Securities and Exchange Commission (SEC) was taking a risk-averse stance towards approving crypto products. Meanwhile, the proposed VanEck/SolidX Bitcoin ETF, much hyped for its launch, was delayed yet again by the SEC.
Being the first company to push the application for a Bitcoin ETF, Bitwise received a plethora of feedback from the SEC. Some key issues mentioned by the company included:
- Market surveillance: The SEC was concerned about the surveillance of the underlying cryptocurrency market due to its unregulated counterparts and fraudulent activities.
- Price manipulation: There was an issue regarding the protection of ETF investors against manipulation in the Bitcoin market, which was seen as weak by the SEC.
- Potential frauds: Bitwise suggested that investors should be protected from frauds that exists or could arise in the future through the trading of exchange-traded products.
Bitwise concluded that the SEC’s concerns were legitimate and should be addressed before an ETF approval. The company also suggested some steps it will take to make sure their ETF application satisfies the SEC’s requirements.
3. What Could Have Been Gained by the Market Cap ETF?
One of the major areas where Market Cap ETFs could have been of significant benefit is in portfolio diversification. With market cap ETFs, investors can gain wider exposure to global markets in order to mitigate risks while also enabling them to benefit from the long-term growth potential of multiple asset classes.
On top of this, a market cap ETF would have enabled investors to take advantage of the low-cost, diversified approach that these funds provide, eliminating the need to manually manage a portfolio. This would have allowed investors to be free of the resource and time consuming legwork involved in each transaction.
Furthermore, market cap ETFs could have provided valuable insights into developing trends and correlations in industry, while creating more efficient tax strategies. This could have allowed investors to focus on seeking opportunities in select sectors, or more accurately time their decisions to buy and sell based on macroeconomic events.
4. Bitwise Sets Sights on ETF Approval in near Future
The Trek to ETF Domination
Bitwise, the leading provider of digital assets, is on track to become a major player in the exchange traded fund (ETF) market. The company’s CEO, Hunter Horsley, has revealed their ambitious plan to file for approval from the Securities and Exchange Commission in the near future. This would make Bitwise the first digital assets provider to be regulated under the applicable laws if approved.
What sets Bitwise apart is their use of innovative indexing methods and their established record of compliance. As the firm has been operating with the SEC’s blessing since 2017, they have built solid relationships with regulators. As a result, Bitwise has consistently held itself to the highest regulatory standards while other digital asset providers have failed to do so.
A major factor that makes Bitwise a viable player in the ETF market is their use of sophisticated indexing tools. By tracking their investment vehicles with indices, they can effectively identify alpha and construct portfolios that are beneficial to customers. Additionally, Bitwise will use trading algorithms to assess the risk of each asset in its portfolio. These algorithms will be designed to identify anomalies and potential consumer fraud.
Bitwise has remained silent about their decision to withdraw their ETF filing with the SEC, but one thing is certain – this withdrawal has left investors and cryptocurrency watchers alike speculating the consequences it may have for the market. Will their plans resurface with new strategies? Only time will tell what the future holds for Bitwise’s ambitions for a digital asset ETF.