Why has Bitwise chosen to withdraw its application for a Bitcoin ETF (BTC)

Cryptocurrency index fund provider Bitwise Asset Management said it has withdrawn its application to issue a Bitcoin futures-backed exchange-traded fund (ETF) in the US, and will instead focus its efforts around a cash Bitcoin ETF.

According to Matt Hougan, Bitwise’s chief investment officer, the company’s proposal for a futures-based ETF has been withdrawn due to the “additional complexity” and higher-than-expected costs associated with such an ETF.

In a Twitter thread on Wednesday, Hougan gave more details on the company’s decision. Initially, his team believed that the benefits of a futures ETF in terms of convenience and accessibility would outweigh the costs of contango, referring to the phenomenon that long-term futures contracts typically trade at a higher price than spot.

In addition, Hougan said they had initially thought it would be possible to hold Canadian-listed Bitcoin exchange-traded products (ETPs) in addition to Bitcoin futures as part of the ETF, which would have reduced the overall costs of managing the fund.

“Unfortunately, this is not allowed,” said Hougan.

As a result, the company concluded that long-term Bitcoin investors “would be better served by cash exposure,” which Hougan said is already available.

In addition, the CIO reiterated that Bitwise has already filed for a cash Bitcoin ETF with the US Securities and Exchange Commission (SEC).

According to the Bitwise executive, the company is confident that it will now be possible to get a cash ETF approved, given the analysis the company has done which concluded that the regulated market that is the Chicago Mercantile Exchange (CME) “is now the primary source of price discovery in the Bitcoin market.”

“Bitwise will therefore continue to pursue this goal, and we will look for other ways to help investors gain access to the incredible opportunities offered by crypto,” Hougan concluded.