Bitwise Files for Bitcoin ETF With the SEC

“Volatility in Bitcoin is notable and likely to receive less investor interest in 2019 than a year ago when prices were skyrocketing higher,” says Todd Rosenbluth, director of ETF and mutual fund research at CFRA, an independent research firm. “Whatever is filed has to overcome that high hurdle. There’s nothing else like it.”

The proposed Bitwise Bitcoin ETF would track the Bitwise Bitcoin Total Return Index, seeking to capture the full value of an investment in Bitcoin, including “meaningful hard forks.” (A hard fork occurs when cryptocurrency developers and miners differ about a proposed change to the software and one group of computers connected to the network upgrade to the new software and the other operates under the old rules, creating two separate blockchains and digital currencies.)

The New York Stock Exchange is expected to file its own application with the SEC in the coming days, known as a Rule 19b-4 filing, for approval to list the ETF.

“The SEC has asked thoughtful and relevant questions about the quality of the crypto trading ecosystem, the reliability of crypto pricing, the strength of the arbitrage function in crypto and the robustness of crypto custody,” said Matt Hougan, global head of research, who oversees Bitwise’s indexing efforts, in a statement. “We have spent the past year researching these questions and look forward to discussing those findings with the SEC staff in connection with the filing and listing application.”

Bitwise Investment Advisers LLC, the sponsor of the proposed ETF who will manage the trust’s investments, has managed private funds in the Bitcoin space for over a year. The firm launched its first crypto-asset index fund, the Bitwise 10 Private Index Fund, in 2017, and currently offers five private funds focused on the crypto space to institutions, family offices, financial advisors and high-net-worth individuals in the U.S. and abroad.

John Hyland, global head of exchange-traded funds for Bitwise, said in a statement that he’s  he’”is optimistic that 2019 should be the year that a Bitcoin ETF launches,” according to a statement. “We believe the crypto trading ecosystem has evolved in significant ways in the past year. We believe that is now possible with Bitcoin.”

Ben Johnson, director of global ETF research at Morningstar, isn’t so sure. He doesn’t see the need for a Bitcoin ETF and tells ThinkAdvisor that Bitcoin ETFs “are a solution in search of a problem. If people really want to buy Bitcoin, they can buy it outright. Wrapping Bitcoin into an ETF doesn’t make the process of purchasing Bitcoin any easier, the way that gold-backed exchange-traded products made it easier for investors to buy gold.”