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Bitwise Plans to Launch Public Bitcoin Fund

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Bitwise Asset Management has begun the regulatory process to launch a second cryptocurrency fund open to the public, one focused just on Bitcoin.

Its first fund, the Bitwise 10 Crypto Index Fund (BITW) debuted in early December and currently has close to $590 million in assets.

The new fund, the Bitwise Bitcoin Fund, has been available as a private placement to accredited investors since December 2018, like BITW was before its public launch.

“There is significant growth interest from professional investors in accessing bitcoin as a tool to hedge their portfolios against rising inflationary risks,” said Matt Hougan, Bitwise’s chief investment officer, in a statement.

”Financial advisors in particular are taking note of the large allocations that hedge funds, institutions, insurance companies and traditional asset managers are making to bitcoin,” Hougan explained.

Next Steps

If cleared by the Financial Industry Regulatory Authority and the Depository Trust and Clearing Corp., the Bitwise Bitcoin Fund would be available to trade in traditional brokerage accounts.

Bitwise plans to list the fund on the OTCQX, the top tier of the over-the-counter market, and would charge a 1.5% expense ratio, compared with the 2% charged by the Grayscale Bitcoin Trust (GBTC) and 2.5% charged by BITW, which includes other cryptocurrencies. Fidelity Digital Asset Services would serve as custodian.

A December 2020 Bitwise survey of 1,000 financial advisors’ attitudes toward crypto assets  found that 9.4% were including cryptocurrencies in client portfolios and 17% were considering a crypto allocation in 2021.

About half said they were attracted to crypto’s low correlation to other assets, 38% were attracted to potential high returns and 25% saw crypto as a potential hedge against inflation, up from 9% the previous year.

Hougan told ThinkAdvisor that Bitwise wants to open a Bitcoin-only fund because some investors are only comfortable with that particular cryptocurrency.

Bitcoin currently accounts for about three-quarters of the firm’s BITW fund.

Trading Scene

Bitcoin is currently trading near $35,000, down from a high near $41,000 in early January but more than 3.5 times its price a year ago.

In early afternoon trading on Feb. 2, BITW was trading near $56 a share, well below its intraday high of $147 reached during its first week of trading but more than double its price on its first day.

The share price is at nearly a 75% premium to the net asset value of the Bitwise 10 Crypto Index Fund (BITW).

Asked whether the new fund is part of of larger effort by Bitcoin champions to get the Securities and Exchange Commission to approve a Bitcoin ETF, which it has rejected in the past, including a filing by Bitwise, Hougan said, “We and other asset managers are working to make a Bitcoin or crypto ETF a reality” and “we will get there eventually.”

He added, that “crypto is one of the few markets where retail has got ahead of institutions.”