Bitwise withdraws Bitcoin and Ethereum market cap ETF application

In an unexpected turn of events, Bitwise has submitted a request to retract its application for the Bitcoin and Ethereum Market Cap Strategy Ethereum Futures Contracts (ETF), initially filed with the Securities and Exchange Commission (SEC) on Aug. 3.

While market sentiment turned bullish following Grayscale’s SEC victory, Bitwise appears to be discreetly reassessing its strategy. The withdrawal for the Bitcoin and Ethereum Market Cap Strategy came unexpectedly; however, in the filing, a statement read, “The fund seeks to provide investors with capital appreciation. There can be no assurance that the fund will achieve its investment objective.”

The timing of the withdrawal application appears peculiar, considering that Bitwise’s Chief Investment Officer, Matt Hougan, advocated for SEC approval of all ETFs in a recent Bloomberg interview. The ETF intended to invest in either Bitcoin Futures Contracts or Ethereum Futures Contracts, determined by their relative market capitalization. Notably, Bitwise also collaborated with ProShares to launch another ETF around the same time.

In the withdrawal statement, the asset management company only said, 

“The Trust no longer intends to seek effectiveness of the Fund and no securities of the Fund were sold, or will be sold, pursuant to the above-mentioned Post-Effective Amendment to the Trust’s Registration Statement.”

The SEC has delayed its decision on Bitcoin (BTC) exchange-traded fund applications from WisdomTree, Invesco Galaxy, Valkyrie, VanEck, BlackRock, Bitwise and Fidelity.  According to the SEC filing, dated Aug. 31, the commission has designated a longer period in which it may review spot Bitcoin ETF applications from WisdomTree, VanEck, Invesco Galaxy, Bitwise and Valkyrie, Wise Origin Bitcoin Trust proposed by Fidelity, as well as BlackRock’s Bitcoin ETF. The next set of deadlines for the SEC is in mid-October, but these may also be delayed to the SEC’s third batch of deadlines, in January, or to the final possible decision dates in March, April and May of next year.

Bitwise was among early asset management firms that lodged applications with the SEC for Bitcoin ETF products. Its Jan. 2019 application with the U.S. securities regulator proposed a BTC-backed ETF tracking the Bitwise Bitcoin Total Return Index, which is calculated based on the value of Bitcoin derived from BTC transactions taking place on exchanges.

Related: SEC delays decision on 6 spot Bitcoin ETF applications

The company’s proposed Bitcoin ETF was touted to draw market data from a number of cryptocurrency exchanges in an effort to provide a trusted representation of the wider cryptocurrency markets. The firm would also require third-party custodians to physically hold Bitcoin.

Bitwise’s recent withdrawal isn’t their first. Earlier this year, they submitted an application for the Ethereum Strategy ETF, designed to invest in both front-time and back-time Ethereum Futures. However, the asset manager pulled this ETF just a week after submitting the application.

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