Bitwise Is Combining Bitcoin and Ethereum ETFs Into a 'Momentum' Fund
Financial assets manager Bitwise has created a new type of financial asset that will combine Bitcoin and Ethereum into a single fund. The fund will be known as the Momentum Fund, and it's already in the process of getting the proper approval.
This is a novel approach to crypto ETF trading, which is in itself new in the world of digital finance. It's not yet sure how the fund will do in the market or if it will get to the market in the first place. However, it's an interesting development to follow since many other asset management funds will try to replace it if it does well.
What are Bitcoin and Ethereum ETFs?
Bitcoin ETFs and Ethereum ETFs are exchange-traded funds (ETFs) designed to track the performance of Bitcoin or Ethereum. This approach to crypto trading is made to allow investors who don't plan to learn how to buy Ethereum or Bitcoin to profit from the success of cryptocurrencies.
The emergence of the ETF shows that cryptos are now widely accepted by traditional financial institutions such as the stock market and that there's a wide market for trading them.
What's the Momentum Fund?
The Momentum Fund created by Bitwise will combine the Bitwise Bitcoin Strategy Optimum Roll ETF (BITC), the Bitwise Ethereum Strategy ETF (AETH), and the Bitwise Bitcoin and Ether Equal Weight Strategy ETF (BTOP). The company said that the decision to do so was made because of a "proprietary signal."
Bitwise follows the value of different cryptocurrencies, and the changes in that value are what led them to combine these ETF assets. It's also motivated by the actions of its competitors in the world of crypto ETFs, all of which are much bigger players than Bitwise.
The Process
The news about the creation of the Momentum fund comes from the documents that Bitwise has filed with the U.S. Securities and Exchange Commission (SEC). It's the governmental regulatory agency that has approved other crypto ETF spots and should do so for Bitwise. The process for doing so may take a while, as it did for Blackrock, which was the first traditional financial company to spot a crypto ETF.
If the bid is approved, Bitwise will join both Blackrock and Fidelity. Currently, the Bitwise Bitcoin ETF holds nearly 39,000 Bitcoins worth $2.3 billion, according to CoinGlass data. Comparatively, it's the smallest asset management fund to get into ETFs.
What is the Momentum Approach?
The fund will take a momentum-based approach to trading crypto ETFs. This means that when Bitwise's signal indicates that "prices are gaining momentum," the fund gains crypto exposure. At the same time, the fund will seek refuge in government debt when the opposite trend emerges.
"Momentum is a well-established factor in virtually every asset class, and it is powerful in crypto as well," said Bitwise CIO Matt Hougan. "The new Trendwise strategies capitalize on that momentum through a trend-following strategy that rotates between crypto and Treasuries exposure based on market direction. The goal is to help minimize downside volatility and potentially improve risk-adjusted returns."
A Great Year for Bitwise
Bitwise has had a great year in terms of its place in the crypto market and the attempts to further improve and innovate its offer. During the year, the company launched its first spot Bitcoin and Ethereum ETPs (in January and July, respectively), acquired the European crypto fund provider ETC Group in August, and filed for a spot XRP ETP in October.
The Momentum strategy would, therefore, be a culmination of the company's effort to get into the new financial products and establish itself as a player in this market.
How Are ETFs Doing?
Bitcoin ETFs were first introduced in January of this year, and Ethereum ETFs are even younger than that. Therefore, it's not easy to analyze how well the assets are doing or whether they justify their purpose. BlackRock has amassed $18 billion in crypto assets so far, meaning that they believe that it's a worthy effort.
The major spot BTC ETFs trading in the USA currently have a combined market capitalization of over $79B. The trading value of Bitcoin spot ETFs has been growing steadily, reaching a cumulative daily volume of over $300B.
To Sum Up
In conclusion, Bitwise's new Momentum Fund marks a significant step forward in crypto ETF trading by combining Bitcoin and Ethereum into one investment strategy. While still awaiting approval, the fund's momentum-based approach, which shifts between crypto and government debt based on market trends, could help investors minimize risks and enhance returns.
This innovation highlights the growing acceptance of cryptocurrencies in traditional finance, and Bitwise's efforts show they're eager to compete with bigger players. As crypto ETFs continue to evolve, it will be interesting to see how this fund performs and influences the market.