Bitwise Asset Management, which still hopes one day to launch an SEC-approved spot bitcoin exchange-traded product, on Tuesday announced the launch of what it says is a new type of bitcoin futures ETF designed for long-term investors.
The Bitwise Bitcoin Strategy Optimum Roll ETF will seek to achieve its investment objective through managed exposure to bitcoin futures contracts and investments in short-term debt securities, according to a Feb. 6 registration statement filed with the SEC.
The ETF is designed to offer investors exposure to bitcoin in a way that minimizes pricing inefficiencies that can emerge in bitcoin-linked ETFs focused on front-month or near-month futures contracts, according to a news release from Bitwise, a crypto asset manager. Front-month futures contracts have earlier expiration dates.
Research shows that a front-month methodology, though desirable for traders with a short time horizon, can generate roll costs that weigh significantly on long-term performance, the release said. Roll costs are incurred when rolling a shorter-term contract into a longer-term contract for the same asset. The new ETF seeks to address that issue via an "optimum roll" strategy that considers all available contracts and selects those with the lowest level of contango, according to the release. The market is said to be in contango when a bitcoin futures contract is trading at a price greater than the spot price of bitcoin, the SEC filing said.
"Historically, optimum roll strategies in other asset classes, such as oil and natural gas futures, have outperformed strategies focused on front-month or near-month contracts over time," said Bitwise CIO Matt Hougan said in the release. "We believe this same strategy can apply to the bitcoin futures market as it continues to deepen and evolve."
The fund has a net expense ratio of 85 basis points, a Bitwise spokesman confirmed. The firm does not disclose assets under management, he said.
In a June 29 order, the SEC disapproved a proposed rule change to list and trade shares of the Bitwise Bitcoin ETP Trust, a proposed spot-bitcoin ETP. Currently Bitwise does not see a path forward for such spot-bitcoin products at the SEC, Mr. Hougan said in comments emailed to Pensions & Investments last week.
"We continue to monitor the situation and plan to refile when the time is right," he said at the time. "In the meantime, we will continue to help financial advisors, family offices, and institutions access the market through other product structures."