1/ Today @NYSE filed for a Bitwise Bitcoin ETF!

It would hold actual BTC, *not* futures.

There’s already a separate BTC futures-based Bitwise ETF filing. But actual BTC is better.

And we believe it’s finally possible.

We're sharing 100+ pages of analysis on why.

2/ First, why do we think BTC is better than futures?

A. Costs: It could cost over 5-10% per year to roll the futures (“contango”). Plus another 1-2% in fees.

B. Dilution: ETFs can't hold 100% BTC futures due to rules. Most aim for 85%. So, 15% is other stuff, even bonds!


C. Tail risk: Remember $USO in 2020? Position limits, liquidity, etc — things can break.

In sum: A futures-based Bitcoin ETF comes with ~6-12% all-in costs, ~15% dilution, and tail risk.

Useful for certain investors, but not ideal.

A direct BTC ETF avoids all that —
4/ So, why hasn't one been allowed?

In 2019 the SEC rejected @bitwiseinvest’s last filing and wrote a 100 page memo sharing their concerns on the market.

Our team spent the last 2+ years quietly doing analysis on this, off-the-record—
5/ The chief concern: their ability to surveil & enforce on manipulation.

They need a “regulated market of significant size” to lead price discovery— just like for other commodity ETFs.

For GLD, the gold market isn’t regulated, but the regulated futures market leads discovery.
6/ For bitcoin, we have a regulated market, the CME.

But is it “of significant size”? Does it lead on price discovery?

We pulled together data sources, reviewed the literature, and used multiple statistical methods.

… which brings us to the good news.
7/ The CME is now the leading source of price discovery in the bitcoin market!

That’s compared to Coinbase, Kraken, Binance, Huobi, BitMEX and even FTX. Prices statistically move first on the CME.

The market has matured.

An actual BTC ETF can now be approved.
8/ It’s great news for all! The SEC wants investor protection. So do all of us.

A BTC ETF would be better for investors.

So, after 2 years, we're filing again, today —

9/ If you want to dig in, we’re making our white papers public:

1. static.bitwiseinvestments.com/Bitwise-Bitcoi…

2. static.bitwiseinvestments.com/Bitwise-Bitcoi…

(For fun, here’s our 2019 report examining fake volumes: )

Even those who aren’t interested in ETFs may enjoy some of the analysis.
10/ Last thing.

Props to you—crypto community—for steering the space to mature in the right ways.

Props to the SEC Staff, who works thanklessly, asking the right questions.

And thanks of course to my @bitwiseinvest colleagues doing the work that needs to be done.


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More from @Matt_Hougan

26 Aug
1/12 All of my friends who are reflexively skeptical of NFTs should spend a bit of time thinking about Damien Hirst’s project, The Currency.
2/12 Hirst is, of course, one of the most successful and important artists of this generation.

A lot of his work stands at the intersection of art & money. For example, he created a human skull encrusted in diamonds. It sold for $100m. Art? Money?
3/12 Given his obsession with the art/money collide, it is not surprising that he was fast to enter the NFT world.
Read 12 tweets

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