Bitwise chose a different path. While many companies were following Gary Gensler, the SEC chair,’s remarks recently and filing for ETFs for bitcoin futures, Bitwise did something differently. Matt Hougan (the asset manager’s chief information officer) shared his reasons on Tweet for why Bitwise chose to apply for approval of a bitcoin ETF rather than one based upon futures.
“There is already a Bitwise ETF filing that is BTC futures-based. Hougan stated that actual BTC is more valuable. “And we believe that it is finally possible.
Hougan created a thread to summarize Bitwise’s 100-page report. It explains why Bitwise believes that the U.S Securities and Exchange Commission will soon capitulate. Bitwise’s CIO cited three major reasons why a bitcoin ETF was better than a Bitcoin futures ETF. These were costs, dilution and tail risk.
Rolling futures (or ‘contango’) could run you more than 5-10% annually. Hougan also wrote that there are another 1-2% fees. Due to regulations, ETFs cannot hold 100% BTC futures. The majority aim for 85%. 15% can be used for other things, bonds, and even money! You can have things fall apart.
A futures-based Bitcoin ETF has [around] 6-12% all in costs, [around] 15% dilution, and tail risk. While it is useful for some investors, it is not ideal. Hougan said that a direct BTC ETF would avoid all of these issues.
According to Hougan, the SEC rejected Bitwise’s earlier filing for a bitcoin ETF in 2019 and wrote a 100-page note sharing their concerns about the market, including ‘their capability to monitor & enforce on manipulating’. To lead price discovery, the commission stated that they need a regulated market of significant size. This is similar to ETFs for commodities. Hougan argues that a regulated market for leading price discovery is already in place, which allows a bitcoin ETF approval.
“The CME is the most important source of price discovery in bitcoin markets!” This is in comparison to Coinbase and Kraken, Binances, Huobi, BitMEX, BitMEX, and even FTX. Hougan explained that prices move first on CME. “The market is maturing. A BTC ETF can be approved now.
Bitwise Asset Management has filed a second time with the SEC to offer a bitcoin ETF in America. Two analysis reports were also published by the firm. The first examines price discovery on the bitcoin market. The second analyses the likely effects of approval of a bitcoin-exchange-traded product.