Bitwise Pulls Plug on Bitcoin and Ethereum Market Cap ETF Application

In a surprising move, Bitwise, an asset management company based in San Francisco, has decided to withdraw its application for the Bitcoin (BTC) and Ethereum (ETH) Market Cap Weight Strategy Exchange-traded fund (ETF) filed with the United States Securities and Exchange Commission (SEC) last month.

 

The decision by Bitwise comes as a surprise, especially given the recent optimistic sentiment surrounding Grayscale’s victory against the SEC. BTC had a really good day on Tuesday, surging to over 7% to reach $27,851.82 and breaking above its 200-day simple moving average after a court ruled that the SEC made a mistake by rejecting Grayscale’s request to change its bitcoin trust into an ETF.

 

Bitwise Withdraws Bitcoin ETF Application

 

However, Bitwise has decided to take a step back and reconsider its strategic approach. According to the ETF withdrawal statement released on August 31, the company emphasized the fund’s objective of providing investors with capital appreciation while acknowledging the inherent uncertainty associated with such investments. The US-based asset manager noted that it does not intend to continue the pursuant of the fund.

 

“The Trust no longer intends to seek the effectiveness of the Fund, and no securities of the Fund were sold, or will be sold, pursuant to the above-mentioned Post-Effective Amendment to the Trust’s Registration Statement.”

 

In an interview with Bloomberg on Thursday, Bitwise’s chief investment officer, Matt Hougan, urged the security watchdog to approve all ETFs submitted to its jurisdiction.

 

“If you look back at the history of the SEC’s treatment of ETFs, you can see examples of each, so we have no idea their plans. On behalf of investors, the best outcome is likely to line up multiple ETFs and allow them to launch at once.”

 

Recall that many companies in the United States, including Bitwise, ProShares, WisdomTree, BlackRock, VanEck, and Valkyrie, have applied for ETFs with the SEC, of which Bitwise has pulled the plug on its application. The funds aimed to invest in either BTC  futures contracts or ETH futures contracts, with the choice between the two determined by market capitalization.

 

Before the recent withdrawal, Bitwise had previously collaborated with ProShares to launch another ETF.

 

SEC Rejects Bitwise Bitcoin ETF Application

 

Bitwise was among the early pioneers to submit Bitcoin ETF applications to the SEC. In January 2019, the company proposed a BTC-backed ETF to track the Bitwise Bitcoin Total Return Index, which calculates Bitcoin’s value based on transactions occurring on various exchanges. The asset management firm planned to source market data from multiple crypto exchanges to represent the broader digital asset market. Additionally, Bitwise intended to employ third-party custodians to hold its Bitcoin at the time.

 

However, that same year, the SEC rejected the application due to failure to meet legal prerequisites to prevent market manipulation and other unlawful activities.

 

In that very year, Bitwise published a report about exchange volume, asserting that 95 percent of BTC’s trading volume was counterfeit. The company presented this argument to persuade the SEC to approve the ETF proposal in court. Despite the SEC’s initial rejection in October, the regulator later reconsidered their decision.

 

Meanwhile, the company’s recent ETF withdrawal is not its first. Earlier this year, the asset manager submitted an application for an Ethereum Strategy ETF designed to invest in both front-time and back-time Ethereum futures. However, the firm withdrew the application a week later, marking another twist in their regulatory journey.

 

SEC Delays Decision on ETF Application

 

With the Bitwise ETF application gone, the crypto community is now awaiting the SEC’s decision on the remaining applications by WisdomTree, Invesco Galaxy, Valkyrie, VanEck, and Fidelity.

According to a Coinspeaker report, the financial regulator has been actively reviewing the application since their submission. However, the final decision on the ETFs has been extended. The next deadline for the SEC’s decision is mid-October, but further delays are possible, extending into January or March, April, and May of next year.