Bitwise’s Surprising ETF Withdrawal

In an unexpected turn of events, Bitwise has filed a request to withdraw its Aug. 3 Securities and Exchange Commission (SEC) registration for the Bitcoin and Ethereum Market Cap Strategy Ethereum Futures Contracts (ETF).

Bitwise appears to be discretely reassessing its strategy as market sentiment turned bullish following Grayscale’s SEC victory. The Bitcoin and Ethereum Market Cap Strategy withdrew unexpectedly.

However, the filing included the following statement: “The fund aims to provide investors with capital appreciation. There is no guarantee that the fund will reach its investment objective.”

Given that Bitwise’s Chief Investment Officer, Matt Hougan, advocated for SEC approval of all ETFs in a recent Bloomberg interview, the timing of the withdrawal application appears odd.

“The Trust no longer intends to seek effectiveness of the Fund and no securities of the Fund were sold, or will be sold, pursuant to the above-mentioned Post-Effective Amendment to the Trust’s Registration Statement.”

Depending on the relative market capitalization of Bitcoin futures contracts and Ethereum futures contracts, the ETF intends to invest in Bitcoin futures contracts or Ethereum futures contracts.

Notably, Bitwise partnered with ProShares to launch a second ETF around the same time. In the withdrawal statement, the asset management firm merely stated, “The SEC has delayed its decision on applications for Bitcoin exchange-traded funds from WisdomTree, Invesco Galaxy, Valkyrie, VanEck, BlackRock, Bitwise, and Fidelity.

According to an SEC filing dated August 31, the commission has extended the review period for spot Bitcoin ETF applications from WisdomTree, VanEck, Invesco Galaxy, Bitwise, Valkyrie, Fidelity’s proposed Wise Origin Bitcoin Trust, and BlackRock’s Bitcoin ETF.

The SEC’s subsequent deadlines are scheduled for mid-October, but they may be pushed back to the third group of deadlines in January or to the final possible decision dates in March, April, and May of next year. Bitwise was among the first asset management firms to submit ETF product applications to the SEC.

Its application to the U.S. securities regulator in January 2019 proposed a BTC-backed ETF monitoring the Bitwise Bitcoin Total Return Index, which is based on the value of Bitcoin derived BTC exchange transactions.

To provide a reliable representation of the broader cryptocurrency markets, the company’s proposed Bitcoin ETF was said to gather market data from a variety of cryptocurrency exchanges.

Additionally, the company would require third-party custodians to tangibly store Bitcoin. The recent withdrawal by Bitwise is not their first.

They applied for the Ethereum Strategy ETF, which is designed to invest in both front- and back-dated Ethereum futures, earlier this year. However, just one week after applying, the asset manager withdrew this ETF.