Bitwise heats up spot ETF competition with $200m seed fund

As the deadline for potential approval of Spot Bitcoin ETFs looms closer, Bitwise is making waves as it looks set to surpass even the world’s largest asset manager, BlackRock, in terms of seed funds for their respective ETFs. 

According to Bitwise’s latest amendment to its S-1 filing with the U.S. Securities and Exchange Commission (SEC), the Schaumburg, Illinois-based company has attracted the interest of an investor prepared to seed its ETF with a substantial $200 million upon launch. 

This figure far overshadows BlackRock’s initial seed fund of $10 million and, as Bloomberg analyst Eric Balchunas points out, could be a significant boost in the early race days.

The SEC is expected to approve the pending ETF applications simultaneously, meaning Bitwise could gain an edge in meeting client demands by being able to create $200 million of shares.

The asset manager has not yet named its authorized participant (AP), the intermediary between the ETF investor and issuer, who is responsible for creating and redeeming the ETF shares. Other issuers, including BlackRock, Invesco Galaxy and Wisdom Tree have already named their APs in their latest S-1 filings with the SEC.

Bitwise predicts Bitcoin price to reach $80k

Notably, Bitwise’s updated application comes nearly two weeks after a spot Bitcoin ETF listing connected to the asset manager appeared on the Depository Trust & Clearing Corporation (DTCC).

The agency is in charge of clearing trades, and an ETF listing on it usually indicates the product is coming to the market.

Bitwise has severally expressed bullishness over Bitcoin (BTC) going into the new year. The company predicted the cryptocurrency will reach new all-time highs by 2024, potentially shooting up to $80,000. 

This sentiment was reiterated by Bitwise’s Chief Investment Officer, Matt Hougan, in a Dec. 6 interview on CNBC, where he stated that he anticipates short-term volatility following this year’s significant surge but expects new all-time highs for Bitcoin within the next six to 12 months.

In the interview, Hougan said he firmly believes that the crypto bear market — often referred to as the crypto winter — is over, marking the beginning of mainstream institutional adoption of crypto assets.

Spot ETF price wars

The race for a spot Bitcoin ETF has become more intense, with seven out of 13 applicants submitting revised S-1 forms to the SEC by the Dec. 29 deadline. 

The contenders include industry heavyweights BlackRock, Van Eck, Grayscale, WisdomTree, Invesco Galaxy, ARK Invest, Valkyrie, and Franklin. Each firm managed to submit their amendments by the deadline.

As the Jan. 10 SEC approval approaches, a subtle price war has emerged among the companies. Invesco Galaxy has reportedly taken an aggressive stance, waiving its fees for the first six months and the first $5 billion in assets, in an attempt to attract early investors. Fidelity, on the other hand, has adopted a fee structure of 0.39%.

Recently, BlackRock disclosed JPMorgan Securities and Jane Street as intended participants for its proposed Bitcoin ETF before the SEC decision.

The asset management giant is set to collaborate with the participants, pending SEC approval.

Authorized participants play a crucial role in ETF operations, as they can create and redeem shares.

This involves exchanging ETF shares for a corresponding basket of securities mirroring the fund’s holdings or opting for a cash exchange. The disclosure of these authorized participants is considered a pivotal step before the SEC decides.

According to Balchunas, the SEC is poised to approve spot Bitcoin ETF proposals that commit to cash-only creations and redemptions, provided they have agreements with authorized participants. The likelihood of SEC approval stands at 90%, with expectations of some firms launching a spot Bitcoin ETF in early January.