Cryptocurrency investment manager Bitwise Asset Management has dropped its application for a Bitcoin futures ETF, citing the costs, fees and complexities associated with the investment product.
Chief investment officer Matt Hougan announced the decision in a tweet thread on Wednesday, noting that "we believe most long-term investors would be better served by spot exposure."
Bitwise's analysis shows that contango — when longer-dated futures contracts trade at a premium to those with shorter maturities — on a Bitcoin ETF could cost investors 5 to 10 percent a year. And that's before accounting for compounding.
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The firm initially believed they would have been able to roll together Bitcoin futures with Canadian exchange traded products (ETP) providing Bitcoin exposure. Such a move would have ideally lowered costs associated with pure futures exposure alone. Regulators, however, have yet to give the greenlight to the arrangement.
Bitwise filed for a spot ETF on Oct. 14. Some market participants have suggested that SEC Chair Gary Gensler's tacit approval of a futures ETF is an indicator of positive momentum for a spot ETF being approved. But market sentiment on the whole has been mixed.
A growing number of U.S. lawmakers have pushed for a spot ETF to be approved, noting that futures contracts can be more volatile than their underlying exposures. In early November, U.S. Reps. Tom Emmer (R-Minn.) and Darren Soto (D-Fla.) penned a letter to Gensler pushing for approval of a spot ETF.
"We question why, if you are comfortable allowing trading in an ETF based on derivatives contracts, you are not equally or more comfortable allowing trading to commence in ETFs based on spot Bitcoin," they wrote in the letter.