Emily Walker
Bitwise, a prominent firm in digital asset management, has submitted a new registration statement to the US Securities and Exchange Commission (SEC) on December 26, 2024, aiming for approval for the “Bitwise Bitcoin Standard ETF.” The submission outlines a fund focused on investing in publicly listed companies that possess significant Bitcoin (BTC) holdings or derive notable revenue from Bitcoin-related operations.
The document emphasizes that the advisory team believes investing in stocks of firms with substantial BTC assets can provide a way to engage with Bitcoin’s performance while addressing issues such as custody risks, regulatory challenges, and liquidity limits.
Focusing on Bitcoin-Heavy Enterprises
The proposal includes a stringent eligibility criterion. Companies must possess a minimum of 1,000 BTC and have a market cap of at least $100 million. Additionally, daily liquidity must be above $1 million, and no more than 10% of the company’s stock can be privately held.
These requirements are put in place to ensure the ETF focuses on well-established companies that genuinely embrace Bitcoin in their operations and financial strategies. Bitwise emphasizes that this method safeguards investors from liquidity risks and governance challenges.
A notable aspect of the filing is Bitwise’s choice to move away from traditional market-cap weightings. Instead, the Bitcoin Standard ETF will weight companies based on the market value of their BTC holdings, capping contributions at 25% per firm.
This system prioritizes the scale of a company’s Bitcoin treasury over its total market size or revenue: “The Fund’s weighting process will concentrate on the assessed market value of each company’s Bitcoin reserves, with restrictions to prevent over-concentration.”
For example, MicroStrategy, a well-known business intelligence firm, currently holds around 444,262 BTC. Although its overall market capitalization is less than Tesla’s, MicroStrategy’s large Bitcoin reserves could result in a higher weighting compared to Tesla, which holds around 11,509 BTC.
Furthermore, the filing states that the fund will allocate at least 80% of its net assets to equity securities of what Bitwise refers to as Bitcoin Standard companies, while also keeping the option to hold short-term instruments like cash for liquidity needs. “Normally, the Fund plans to invest at least 80% of its net assets in stocks of firms that have significant Bitcoin holdings or generate substantial revenue from Bitcoin,” the filing clarifies.
The community response has been largely favorable. Nate Geraci, president of The ETF Institute, remarked on X: “The btc treasury operations virus is spreading.” James McKay, founder of McKay Research, added: “You know the ‘thing’ is important when exposure to a thing that owns the thing is getting its own wrapper.”
On the same day that Bitwise filed its proposal, Vivek Ramaswamy’s Strive Asset Management also introduced a competing Bitcoin ETF proposal, named the Strive Bitcoin Bond ETF, which aims to focus on convertible bonds from firms with considerable BTC holdings, such as MicroStrategy.
As of now, BTC is trading at $94,857.