Founded in 2017, the cryptoasset management firm currently runs a “HOLD 10 Private Index Fund”. Bitwise claims that the fund created on 22 November 2017 is the world’s first cryptocurrency index fund.
Further, the fund’s Fact Sheet states that the index tracks the Bitwise Hold 10 Index, which is based on 10 largest cryptocurrencies based on 5-year diluted market capitalization, compliance, and minimum trading volume. On a monthly basis, the portfolio is reshuffled. As of June 30, 2018, the index was made up of Bitcoin (55%), XRP (9.4%), Ethereum (20%), Dash (1.3%), Bitcoin Cash (6.4%), Litecoin (2.6%), Monero (1.1%), Stellar Lumens (2.3%), Zcash (1%) and Ethereum Classic (1%).
As HOLD 10 Private Index Fund is marketed only to accredited investors in the US, the fund did not have any need to obtain permission from the SEC. The SEC has not approved any Bitcoin ETF so far. However, Bitwise must be confident that the day of financial regulator’s approval for a Bitcoin ETF is not far away. Therefore, the company has filed its application for the first publicly-offered cryptocurrendy index ETF.
Matt Hougan, the company’s Global Head of Research and former CEO of ETF.com, told CNBC
“We’re joining the queue… The market is professionalizing in a direction that the SEC would allow a crytpo ETF onto the market.”
Hougan stated that the new ETF will be named the “Bitwise HOLD 10 Cryptocurrency Index Fund.” He further revealed that the fund will also track “the returns of Bitwise’s HOLD 10 Index.”
John Hyland, Global Head of Exchange Traded Products at Bitwise, stated:
“We are aware that other investment firms have filed for cryptocurrency ETFs under the Securities Act of 1933, and that there continues to be interest in filing under the Investment Company Act of 1940. As best we know, all of these funds plan to offer exposure to a single coin such as bitcoin or ether. That is fine, but our proposed offering is obviously different… We know that the current crypto ETF filings have generated a great deal of discussion and analysis within the SEC about this emerging asset class, and the SEC and its staff, to their credit, have asked for public comment on a wide range of issues relating to these products. We expect the staff of the SEC has had ongoing discussions with the investment firms making the crypto filings to date, and we look forward to having our own discussions with the SEC about the nature of our proposed offering.”
Bitwise’s Global Head of Research, Matt Hougan also stated
“Our research shows that an index-tracking basket of multiple cryptocurrencies behaves differently than a single coin. As such, we think both sorts of exposure need to be looked at by investors when considering the growing cryptocurrency space. Our view is that this new area has many similarities to the introduction 10 to 15 years ago of commodity ETFs. At that time, we saw the launch of single-commodity ETFs tracking gold, silver, crude oil, and other commodities, as well as ETFs tracking diversified commodity index baskets. We see a lot of similarities here.”
Price volatility, lack of satisfactory custodial solutions and alleged price manipulation are some of the concerns which hold back the SEC from issuing approval to Bitcoin ETFs. However, the recent Bitcoin rally and increasing adoption of blockchain technology has raised the hopes of investors.