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Bitwise Withdraws Bitcoin Futures ETF Application

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What You Need to Know

  • Bitwise is the second asset manager to step away from a Bitcoin futures ETF, following Invesco in late October.
  • Bitwise's Matt Hougan cited problems related to the futures market.
  • Direxion and Valkyrie ended plans for an inverse and a leveraged Bitcoin ETF, respectively.

Another asset manager has stepped away from plans to launch a Bitcoin futures ETF. Bitwise Asset Management, which also has a spot Bitcoin ETF application pending before the Securities and Exchange Commission, withdrew its Bitcoin futures ETF application, citing a number of issues specific to the futures market.

Matt Hougan, chief investment officer of Bitwise, explained in a series of tweets that because Bitcoin futures tend to trade in contango — meaning contracts in later months cost more than those in front months — investors rolling over Bitcoin futures ETF into future months would cost investors 5-10% per year, before compounding. “Contango today is running a bit over 6%/year,” he tweeted.

Since Bitwise filed its Bitcoin futures application in September, “new challenges have emerged,” tweeted Hougan. It discovered it could not hold within the fund both Bitcoin futures and a Canadian-listed Bitcoin ETF that invests in actual Bitcoin, which could have reduced costs.

Meanwhile, the Bitcoin futures ETFs already trading in the U.S. “have already soaked up all available capacity at futures commission merchants,” he tweeted. “This will ease over time, but for now, it’s added yet another expense. The result? Costs on top of costs, plus added complexity.”

The Bitwise withdrawal follows a decision Invesco made in late October to ”not to pursue the launch of a Bitcoin futures ETF in the immediate near-term,” but Invesco said it would continue to work with partner Galaxy Digital “to offer investors full shelf of products with exposure to this transformative asset class, including pursuing a physically backed, digital asset ETF.”

Invesco, too, has an application for a spot Bitcoin ETF pending before the SEC along with more than a dozen other asset managers.

In recent weeks, Direxion withdrew its application for its inverse Bitcoin futures ETF, which would bet against the price of Bitcoin rising, and Valkyrie, which had already launched a Bitcoin futures ETF, withdrew its application for a leveraged Bitcoin futures ETF. SEC staff asked both firms to withdraw those applications.

To date, two Bitcoin futures ETFs are trading — the Valkyrie Bitcoin Strategy Fund (BTF) and the ProShares Bitcoin Strategy ETF (BITO), which was the first to launch, on Oct. 19. BITO has amassed $1.28 billion in assets. BTF, which launched three days later, has $61.2 million in assets. Both are trading above their debut prices, but they have not appreciated as much as Bitcoin itself. Bitcoin is currently trading near $65,000.