Bitwise Pulls Bitcoin and Ether Market Cap ETF Proposal

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Key takeaways:

  • Bitwise submitted a request to withdraw its exchange-traded fund (ETF) application for its Bitcoin and Ether Market Cap Weight Strategy.
  • Bitwise Chief Investment Officer Matt Hougan argued for SEC approval for all ETFs.

Unexpectedly, Bitwise submitted a request to withdraw its exchange-traded fund (ETF) application for its Bitcoin and Ether Market Cap Weight Strategy, which was initially introduced to the US Securities and Exchange Commission (SEC) on August 3.

Following Grayscale’s SEC triumph, the market’s mood became optimistic, but Bitwise seems to be rethinking its approach. Unexpectedly, the ETF application was withdrawn; nonetheless, the filing contained the following statement: 

“The fund seeks to provide investors with capital appreciation. There can be no assurance that the fund will achieve its investment objective.”

In a recent interview with Bloomberg, Bitwise Chief Investment Officer Matt Hougan argued in favor of SEC approval for all ETFs. Based on market capitalization, the ETF sought to invest in either Bitcoin or Ether futures contracts. Around the same time, Bitwise and ProShares worked together to introduce a different ETF. Bitwise stated in the withdrawal statement:

“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.”

The SEC has postponed applications for Bitcoin ETFs from WisdomTree, Invesco Galaxy, Valkyrie, VanEck, BlackRock, Bitwise, and Fidelity. In a filing with the SEC dated August 31, the commission stated that it would have more time to consider proposals for spot Bitcoin ETFs from WisdomTree, VanEck, Invesco Galaxy, Bitwise, and Valkyrie, as well as the Wise Origin Bitcoin Trust put forth by Fidelity and BlackRock’s Bitcoin ETF. 

The SEC’s third batch of deadlines, in January, and the last possible decision dates, in March, April, and May of the following year, are the next set of deadlines due in mid-October.

Bitwise was one of the first asset management companies to submit applications to the SEC for Bitcoin ETF products. It suggested a BTC-backed ETF following the Bitwise Bitcoin Total Return Index in its January 2019 application to the US securities regulator. This index is produced based on the value of Bitcoin derived from BTC transactions taking place on exchanges.

To give a reliable representation of the larger cryptocurrency markets, the company’s proposed Bitcoin ETF was said to pull market data from various cryptocurrency exchanges. Additionally, the company would demand that third-party custodians possess Bitcoin.

The most recent Bitwise withdrawal is not the first. It submitted a proposal for an Ethereum Strategy ETF earlier this year, intending to invest in both front-time and back-time Ethereum futures. But a week later, the fund manager withdrew its application.

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