Asset manager Bitwise, in partnership with ETF Series Solutions, filed with the SEC to launch the Bitwise Bitcoin Strategy ETF on September 14th.
According to the filing, the fund will invest primarily in Bitcoin futures contracts registered with the Commodity Futures Trading Commission and will not hold bitcoin directly. It may also invest in “pooled investment vehicles and Canadian-listed funds that provide exposure to Bitcoin.”
The fund plans to have significant cash, U.S. government security, and money market fund holdings as well. These holdings will provide liquidity and serve as collateral for the fund’s Bitcoin futures contracts.
The futures contracts will be rolled, meaning that the fund will sell the contracts before they expire and replace them with contracts with a later expiration. The fund will invest a maximum of 25% of its total assets in a wholly owned Cayman Islands subsidiary.
The filing lists Exchange Traded Concepts LLC as the investment manager but does not list a portfolio manager. Bitwise Index LLC is listed as the fund’s sponsor and as such will pay all expenses of the fund (with a few exceptions) as well as provide administrative and marketing support.
No management fee or ticker was listed.
Comments from SEC Chair Gary Gensler last month indicated that the regulator might look more favorably on ETFs invested in Bitcoin futures rather than those planning to hold Bitcoin directly, prompting a number of issuers to file for Bitcoin futures ETFs.
The regulator has yet to make a decision on any of the twenty-some digital asset ETFs currently under review.
Bitcoin futures ETFs are invested in futures contracts offered by the Chicago Mercantile Exchange and regulated by the CFTC. Such contracts are cash settled, with the settlement equal to the difference between the value of the bitcoin underlying the futures contract on the last day of trading and the price specified in the original contract.
Bitcoin futures are valued using the CME CF Bitcoin Reference Rate (BRR) which calculates the price of bitcoin by aggregating the trade flow of major bitcoin exchanges. The BRR is a daily reference rate of the U.S. dollar price of one bitcoin as of 4 p.m. London time.
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