Spot Crypto ETFs Prompted Bitwise to Rethink Its Fund Lineup

• Bitwise is converting three of its futures-based exchange-traded products into a single fund.
• The fund, called the Bitwise Trendwise Bitcoin and Treasuries Rotation Strategy ETF, will rotate between 100% exposure to crypto futures contracts and 100% exposure to U.S. Treasuries.
• The conversion will take place on Dec. 3, the asset manager said.

Bitwise was one of the money managers who joined the spot bitcoin ETF revolution earlier this year, introducing a fund that now holds $2 billion of the cryptocurrency.

But that plus the subsequent introduction of exchange-traded funds for Ethereum's ether (ETH) diminished interest in three older Bitwise products that gave investors bitcoin (BTC) and ether exposure in a way now deemed less appealing. This prompted the company to merge that trio of funds, which held futures contracts tied to the cryptocurrencies, into a single product that takes a slightly different tack involving U.S. Treasures.

Bitwise announced the Bitwise Trendwise Bitcoin and Treasuries Rotation Strategy ETF (BITC) on Friday, a fund that combines the Bitwise Bitcoin Strategy Optm Roll ETF (BITC), Bitwise Ethereum Strategy ETF (AETH) and Bitwise Bitcoin and Eth Eq Wgh Str ETF (BTOP).

In a statement, Bitwise said that the launch of the spot bitcoin and ethereum ETFs earlier this year has made futures-based crypto funds less compelling for investors looking for long-term capital appreciation.

With the new fund, the asset manager can better manage the volatility of the crypto market by rotating between 100% exposure to crypto futures contracts and 100% exposure to U.S. Treasuries based on market trends.

"Bitwise is likely just catering to things they're hearing from clients and potential clients," said James Seyffart, ETF analyst at Bloomberg Intelligence. "They have an actively managed division within Bitwise, so it makes sense to give it a try. We know there are investors looking to invest in bitcoin but who want to limit the volatility and particularly the downside volatility/drawdowns. I think that's what this will aim to do. Whether or not it will be successful is something we will learn in the coming years, but timing the market is extremely hard."

The conversion will likely take place on Dec. 3, the asset manager said. The new fund will charge investors a 0.85% expense ratio.