Why Bitwise Is Combining Bitcoin and Ethereum ETFs Into a ‘Momentum’ Fund

Asset manager Bitwise is streamlining three of its futures-based crypto ETFs, set to fold the products into a single offering in December, according to documents filed Friday with the U.S. Securities and Exchange Commission (SEC). 

Dubbed the Bitwise Trendwise Bitcoin and Treasuries Rotation Strategy ETF, the fund’s strategy entails periodically shifting exposure between Bitcoin and Ethereum futures contracts and assets like U.S. Treasuries. Those changes are motivated by “a proprietary signal,” the firm said, which looks at several moving averages for cryptocurrency prices.

The new fund will combine the Bitwise Bitcoin Strategy Optimum Roll ETF (BITC), the Bitwise Ethereum Strategy ETF (AETH), and the Bitwise Bitcoin and Ether Equal Weight Strategy ETF (BTOP).

The slated conversion follows Bitwise’s entry into the spot Bitcoin ETF space alongside financial titans like BlackRock and Fidelity in January, following SEC approval. Currently, the Bitwise Bitcoin ETF holds nearly 39,000 Bitcoin worth $2.3 billion, according to CoinGlass data.

The fund takes a momentum-based approach toward investing in Bitcoin and Ethereum futures. When Bitwise’s signal indicates that “prices are gaining momentum,” the fund gains crypto exposure, while seeking refuge in government debt when the opposite trend emerges.

“Momentum is a well-established factor in virtually every asset class, and it is powerful in crypto as well,” Bitwise CIO Matt Hougan said in a press release, adding that the new fund’s goal is to “help minimize downside volatility and potentially improve risk-adjusted returns.”

Following the launch of its spot Ethereum ETF in July, Bitwise has continued to position itself as a purveyor of funds giving investors access to crypto through traditional brokerage accounts. Earlier this week, Bitwise filed an industry-first application for a spot XRP ETF in the U.S.

The first futures-based crypto ETF was approved three years ago, when regulators gave ProShares’ Bitcoin Trust a green light. Since the launch of spot-based alternatives, however, several asset managers have recalibrated futures-based offerings.

VanEck said last month, for example, that it would liquidate its futures investment product for Ethereum. The firm cited investor interest and liquidity as factors for determining the move.

Bitwise’s new fund is set to charge investors a 0.85% fee ratio, and its prospectus makes clear that it does not invest directly in digital assets. Because the fund can rotate its exposure into U.S. Treasuries completely, Bitwise said “there will be periods—and perhaps extended periods—when the Fund has no exposure to Bitcoin futures contracts” at all.

While Bitwise lists its three funds’ “limited operating history” as a potential risk, Bitwise President Teddy Fusaro said in a statement that the company is breaking new ground with the product.

“At Bitwise, we believe there are many different ways in which investors will want to gain access to this new and emerging asset class,” he said. “We’re excited to introduce new groundbreaking strategies for these three ETFs to give investors more options for accessing the market.”

Edited by Andrew Hayward