A new exchange-traded fund (ETF) from Bitwise began trading on Tuesday, providing retail investors and financial advisors with unprecedented access to a diverse range of cryptocurrencies. Unlike previous ETFs that typically focused on one or two digital currencies, the Bitwise 10 Crypto Index ETF (BITW) encompasses a selection of ten different cryptocurrencies.
The fund’s portfolio includes Bitcoin, Ethereum, XRP, Solana, Chainlink, Litecoin, Cardano, Avalanche, Sui, and Polkadot. This makes BITW the first ETF from a major crypto asset manager to feature Avalanche, Sui, and Polkadot, as highlighted by Bitwise CEO and co-founder Hunter Horsley in a recent statement. He noted that this development significantly broadens the audience able to access exposure to various digital assets, particularly those lacking a spot ETF.
The ETF emerged from an index fund that previously held the same digital assets, launching with over $1 billion in assets under management. By utilizing an ETF structure, the fund provides financial advisors and smaller investors, including those investing through IRAs or retirement accounts, a preferable vehicle given that their only current option is to invest through ETFs.
ETFs offer a variety of advantages over other types of funds, such as enhanced trading flexibility, tax efficiency, and often lower fees. The launch follows the Securities and Exchange Commission’s approval of several spot bitcoin ETFs in January 2024, which has sparked competition among asset managers eager to gain approval for tracking a more extensive array of digital assets, including altcoins and popular memecoins.
However, the market conditions surrounding this launch are complex. The cryptocurrency market has seen considerable pullbacks recently, with Bitcoin trading as low as $85,000, more than 30% off its record high of just above $126,000 from October. Smaller, less established coins, which have fewer institutional investment products, have suffered more than their larger counterparts. This raises concerns about the potential for larger losses among smaller investors who may participate in the new ETF.
On the other hand, as the cryptocurrency ecosystem evolves, the ability to invest through a diversified ETF could serve as a stabilizing element for investors, similar to how broader index funds function in traditional equity markets. Horsley emphasized that now is an opportune moment for investors who have gained interest since the Bitcoin ETF’s launch and are seeking a more holistic approach to their digital asset allocations without having to pick and size multiple investments.
Despite its extensive offerings, BITW limits exposure to smaller coins within its portfolio. Approximately 90% of the fund’s holdings are allocated to the more established cryptocurrencies—Bitcoin, Ethereum, Solana, and XRP. The ETF caps the combined weight of all remaining tokens at just 10%. Additionally, the fund will undergo monthly rebalancing, which is more frequent than the quarterly or semi-annual rebalancing typical among many ETFs.
Bitwise currently manages over $15 billion in client assets and offers a suite of more than 40 digital asset investment products. Upon its debut on the NYSE Arca exchange, BITW saw a slight increase of 1.5%.
