Dive into the World of Bitcoin-oriented Financial Products: Bitwise and Strive Financial
Unraveling the Frankfurt Scene
Bitcoin Fund Managers Blueprint Novel Exchange-Traded Funds
The meteoric rise of Bitcoin has sparked the creation of innovative financial solutions that track its performance. After the inception of Bitcoin ETFs, two US asset managers, Bitwise and Strive Financial, are now planning to introduce ETFs that invest in publicly-listed companies with substantial Bitcoin holdings. Companies like Microstrategy, with their increasing borrowing to buy more Bitcoin, are paving the way for such strategies.
Bitwise Bitcoin Standard ETF: Setting the Stage
Two forthcoming vehicles have made their way into the approval pipeline. One of them is the "Bitwise Bitcoin Standard Corporations ETF". As per the prospectus, eligible investments will be limited to companies that hold a bare minimum of 1,000 Bitcoin, a criterion that, as far as we know, only Microstrategy currently meets.
To qualify, companies must have a minimum market capitalization of $100 million and a daily trading volume of at least $1 million. Investments will be weighted based on the amount of Bitcoin held, not market capitalization.
Strive Financial: The Bitcoin Bond Approach
Vivek Ramaswamy, co-founder of Strive Financial, also intends to launch an ETF for public listing. Ramaswamy's Strive Asset Management, established in early 2022, garnered $20 million in investments from heavyweights like Peter Thiel, J.D. Vance, and Bill Ackman.
In the pipeline is the "Strive Bitcoin Bond ETF", focusing on convertible bonds similar to those issued by Microstrategy, with the proceeds normally used for Bitcoin purchases. Unlike the Bitwise ETF, this ETF will forgo weighting, allowing it to concentrate on a select few bond investments.
The Wider Landscape of Bitcoin Exposure
The landscape is favorable for ETFs providing Bitcoin exposure. With a crypto-friendly regulatory environment under the new US administration, there's an increased likelihood of investment influx into the sector. Moreover, holding Bitcoin as a reserve has emerged as an industry trend, with proposals suggesting that central banks should incorporate Bitcoin alongside traditional currencies. However, changes to the Federal Reserve's investment guidelines and European Central Bank's stance are still uncertain.
Ramaswamy's reputation was heightened by his vision to streamline government agencies, aiming to reduce the 'deep state' and curb bureaucracy, inspired by Javier Milei's radical approach in Argentina and supported by Elon Musk in his plans to lead the Department of Government Efficiency (DOGE).
Enriching the Buzz
- Bitwise ETF Context: Recent filings suggest Bitwise's active involvement in cryptocurrency ETF development. Bitwise's name surfaces in filings related to Ethereum ETFs and has a Dogecoin ETF application under review by the SEC.
- Key Approval Criteria for crypto ETFs:
- Custody Solutions: Qualified custodians like Coinbase Custody are essential for secure storage.
- Surveillance-Sharing Agreements: Robust market monitoring is necessary through partnerships with regulated entities.
- Liquidity and Market Integrity: Sufficient trading volume and measures to prevent market manipulation are emphasized.
- Strive Financial's Bitcoin Bond ETF: No specifics are available for this product in the documents. Bitcoin bond ETFs would likely require clear mechanisms for creditworthiness, interest rate/refinancing risk disclosures, and compliance with both fixed-income and crypto asset regulations.
Decisions on altcoin ETFs, potentially including Bitcoin bond products, could stretch until late 2025 or 2026, with no definite approvals on the horizon as of now. The SEC continues to focus on direct-asset custody and market surveillance.
- Bitwise and Strive Financial, two US asset managers, are planning to introduce ETFs that invest in publicly-listed companies with substantial Bitcoin holdings, such as Microstrategy, which has been increasing its borrowing to buy more Bitcoin.
- The Bitwise Bitcoin Standard Corporations ETF, one of the forthcoming vehicles, will limit eligible investments to companies that hold a minimum of 1,000 Bitcoin, a criterion only currently met by Microstrategy.
- Strive Financial, co-founded by Vivek Ramaswamy, plans to launch an ETF focusing on convertible bonds similar to those issued by Microstrategy for Bitcoin purchases, called the Strive Bitcoin Bond ETF.
- The wider landscape of Bitcoin exposure is favorable due to a potential crypto-friendly regulatory environment, with an increased likelihood of investment influx into the sector, but changes to the Federal Reserve's investment guidelines and European Central Bank's stance are still uncertain.
