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Bitwise withdraws Bitcoin (BTC) futures ETF application

Fri 12 Nov 2021 ▪ 13h37 ▪ 3 min read — by Mary Anderson

Bitwise Asset Management is withdrawing its application for a Bitcoin futures ETF (exchange-traded fund) in order to focus on launching a spot BTC ETF.

Choosing spot ETF over futures ETF

Bitwise abandoned the idea of creating a futures-based BTC ETF in favour of plans to launch a spot (based on Bitcoin itself, not futures) Bitcoin ETF. Matt Hougan, Chief Investment Officer of Bitwise Asset Management, announced it on Twitter yesterday, 11th November. In his opinion, a spot ETF meets the needs of long-term investors better than the futures one.

According to beincrypto, the application to launch a spot BTC ETF from Bitwise has to compete with several others that are currently under consideration by the US Securities and Exchange Commission (SEC). However, the regulator’s opinion on such funds has not changed over the past year. The SEC still prefers futures ETF, referring to the fact that this is the only way to guarantee the safety of such services’ customers.

Added costs

In Hougan’s opinion, spot ETFs are better for long-term investors due to the lack of costs associated with their futures counterparts – contango. Contango is a price premium charged by the seller for postponing the settlement of the transaction. Contango is a situation when the futures price is higher than the spot price. According to Bitwise analysts, contango will annually cost about 5-10% before compounding. All these expenses will fall on the shoulders of investors.

Currently, the contango is more than 6%, and the advantages offered by the Bitcoin futures ETF do not justify it. In the end, we have “costs on top of costs, plus added complexity”.

Hougan also stated that Bitwise will continue to seek the right to launch a spot BTC ETF. Earlier, the company even released a detailed report containing comprehensive information about why spot exchange-traded funds are much better than their futures counterparts.

However, in the end, everything will depend on the SEC’s decision. It is unlikely that the financial regulator which always puts the safety of investors before everything else will simply abandon its beliefs. Especially if the main advantage of spot ETFs will be argued as the financial benefit of investors, not their security.

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Mary Anderson avatar
Mary Anderson

I am sure that crypto assets are a new type of economy. We are at the origins of the crypto revolution. Right now, it is worth studying what cryptocurrencies and the blockchain are in order to make the most of this knowledge and these skills in the future.

DISCLAIMER

The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.

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