Crypto specialist Bitwise Asset Management filed today to convert its three crypto futures ETFs from long-only strategies to strategies that rotate between crypto and U.S. Treasuries exposure based on market trends.
The ETFs will follow Bitwise’s proprietary “Trendwise” rotation strategy, which attempts to minimize downside volatility and achieve long-term price appreciation by rotating out of crypto and into Treasuries when crypto markets are in retreat.
The conversion is expected to take place on or around December 3, 2024. The funds will change their names and strategies as follows:
- BITC: The Bitwise Bitcoin Strategy Optimum Roll ETF will convert to the Bitwise Trendwise Bitcoin and Treasuries Rotation Strategy ETF
- AETH: The Bitwise Ethereum Strategy ETF will convert to the Bitwise Trendwise Ethereum and Treasuries Rotation Strategy ETF
- BTOP: The Bitwise Bitcoin and Ether Equal Weight Strategy ETF will convert to the Bitwise Trendwise BTC/ETH and Treasuries Rotation Strategy ETF
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.”
The strategy follows a proprietary signal that considers the 10- and 20-day exponential moving average (EMA) price of crypto assets like Bitcoin and Ethereum. It generally invests in the funds’ respective crypto assets when the 10-day EMA is above the 20-day EMA—a signal that prices are gaining momentum—and rotates into Treasuries when the reverse is true.
There will be no change to the funds’ expense ratios or tax treatments, and existing investors in the funds do not need to take any action.
The filing augments an eventful 2024 for Bitwise. 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.
“At Bitwise, we believe there are many different ways in which investors will want to gain access to this new and emerging asset class,” said Teddy Fusaro, President of Bitwise. “We’re excited to introduce new groundbreaking strategies for these three ETFs to give investors more options for accessing the market.”
Founded in 2017, Bitwise offers industry-leading education and a broad suite of professional investment products spanning ETFs, private funds, active solutions, and separately managed account strategies. The firm serves as a partner to thousands of investment professionals and financial institutions looking to understand and access bitcoin and other crypto assets.
RISKS AND IMPORTANT INFORMATION
Carefully consider the investment objectives, risk factors, charges, and expenses of any Bitwise investment product before investing. This and additional information can be found in each Fund’s full or summary prospectus, which may be obtained by visiting: for AETH, https://www.AETHetf.com/materials/; for BITC, https://www.BITCetf.com/materials/; for BTOP, https://www.BTOPetf.com/materials/. Investors should read this information carefully before investing.
Investing involves risk, including the possible loss of principal. Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns.
There is no guarantee or assurance that the Fund’s methodology will result in the Fund achieving positive investment returns or outperforming other investment products.
Bitwise Investment Manager, LLC serves as the investment advisor of the AETH, BITC, and BTOP Funds. The Funds are distributed by Foreside Fund Services, which is not affiliated with Bitwise Investment Manager LLC, Bitwise, or any of its affiliates.
The Funds utilize a “long-flat” trend-following investing strategy pursuant to which the Adviser rotates the Fund’s exposure between 100% exposure to Bitcoin Futures (BITC), Ether Futures (AETH), or both Bitcoin and Ether Futures Contracts (BTOP) and 100% exposure to U.S. Treasury securities, based upon a proprietary signal that is based upon bitcoin’s 10-day and 20-day exponential moving average price.
Due to the nature of the Fund’s trend-following investment strategy, there will be periods – and perhaps extended periods – when the Fund has no exposure to Bitcoin and Ether Futures Contracts, as the entirety of its assets will be invested in U.S. Treasury securities.
The fund's rotating investment in US treasuries does not guarantee a profit and is not insured by FDIC or any other government agency.
AETH Risks
The Fund invests in Ether Futures Contracts. The Fund does not invest directly in or hold Ethereum. As a result, the price of Ethereum Futures Contracts should be expected to differ from the current cash price of Ethereum, which is sometimes referred to as the “spot” price of Ethereum. Consequently, the performance of the Fund should be expected to perform differently from the spot price of Ethereum. These differences could be significant. Investors seeking direct exposure to the price of Ethereum should consider an investment other than the Fund.
Risk of Loss. The prices of Ethereum and Ethereum Futures Contracts have historically been highly volatile. The value of the Fund’s investments in Ethereum Futures Contracts—and therefore the value of an investment in the Fund—could decline significantly and without warning, including to zero, and you may lose the full value of your investment within a single day. If you are not prepared to accept significant and unexpected changes in the value of the Fund and the possibility that you could lose your entire investment in the Fund you should not invest in the Fund.
Liquidity Risk. The market for Bitcoin and Ether Futures Contracts is still developing and may be subject to periods of illiquidity. During such times it may be difficult or impossible to buy or sell a position at the desired price. Market disruptions or volatility can also make it difficult to find a counterparty willing to transact at a reasonable price and sufficient size.
Cost of Futures Investment Risk. Ethereum Futures Contracts have historically experienced extended periods of contango. Contango in the Ethereum Futures Contracts market may have a significant adverse impact on the performance of the Fund and may cause Ethereum Futures Contracts and the Fund to underperform the spot price of Ethereum.
Ethereum Risk. Ethereum is a relatively new innovation and the market for Ethereum is subject to rapid price swings, changes and uncertainty. Ethereum is not legal tender and generally operates without central authority (such as a bank) and is not backed by any government. The slowing, stopping or reversing of the development of the Ethereum Network or the acceptance of Ethereum may adversely affect the price of Ethereum.
Borrowing Risk. The Fund may borrow for investment purposes using reverse repurchase agreements. The cost of borrowing may reduce the Fund’s return. Borrowing may cause a Fund to liquidate positions under adverse market conditions to satisfy its repayment obligations. Borrowing increases the risk of loss and may increase the volatility of the Fund.
Frequent Trading Risk. The Fund regularly purchases and subsequently sells (i.e., “rolls”) individual futures contracts throughout the year so as to maintain a fully invested position. This frequent trading of contracts may increase the amount of commissions or markups to broker-dealers that the Fund pays when it buys and sells contracts, which may detract from the Fund’s performance.
Leverage Risk. The Fund seeks to achieve and maintain the exposure to the spot price of Ethereum by using leverage inherent in futures contracts. Therefore, the Fund is subject to leverage risk. As a result, these investments may magnify losses to the Fund, and even a small market movement may result in significant losses to the Fund. Leverage may also cause a Fund to be more volatile because it may exaggerate the effect of any increase or decrease in the value of the Fund’s portfolio securities.
New Fund Risk. The Fund is a recently organized investment company with a limited operating history. As a result, prospective investors have a limited track record or history on which to base their investment decision.
Nondiversification Risk. As a nondiversified fund, the Fund may hold a smaller number of portfolio securities than many other funds. The value of the Fund Shares may be more volatile than the values of shares of more diversified funds.
BITC Risks
The Fund invests in Bitcoin Futures Contracts. The Fund does not invest directly in or hold bitcoin. As a result, the price of Bitcoin Futures Contracts should be expected to differ from the current cash price of bitcoin, which is sometimes referred to as the “spot” price of bitcoin. Consequently, the performance of the Fund should be expected to perform differently from the spot price of bitcoin. These differences could be significant.
Risk of Loss. The market for bitcoin futures contracts is still developing and may be subject to periods of illiquidity. During such times it may be difficult or impossible to buy or sell a position at the desired price. Investors in the fund should be willing to accept a high degree of volatility in the price of the Fund’s shares and the possibility of significant losses. An investment in the fund involves a substantial degree of risk.
Blockchain Technology Risk. Certain of the Fund’s investments may be subject to the risks associated with investing in blockchain technology. The risks associated with blockchain technology may not fully emerge until the technology is widely used. Blockchain systems could be vulnerable to fraud, particularly if a significant minority of participants colluded to defraud the rest. Because blockchain technology systems may operate across many national boundaries and regulatory jurisdictions, it is possible that blockchain technology may be subject to widespread and inconsistent regulation.
Borrowing Risk. The Fund may borrow for investment purposes using reverse repurchase agreements. The cost of borrowing may reduce the Fund’s return. Borrowing may cause a Fund to liquidate positions under adverse market conditions to satisfy its repayment obligations.
Frequent Trading Risk. The Fund regularly purchases and subsequently sells (i.e., “rolls”) individual futures contracts throughout the year so as to maintain a fully invested position. As the contracts near their expiration dates, the Fund rolls them over into new contracts. This frequent trading of contracts may increase the amount of commissions or mark-ups to broker-dealers that the Fund pays when it buys and sells contracts, which may detract from the Fund’s performance.
Leverage Risk. The Fund seeks to achieve and maintain the exposure to the spot price of bitcoin by using leverage inherent in futures contracts. Therefore, the Fund is subject to leverage risk.
Nondiversification Risk. As a nondiversified fund, the Fund may hold a smaller number of portfolio securities than many other funds. To the extent the Fund invests in a relatively small number of issuers, a decline in the market value of a particular security held by the Fund may affect its value more than if it invested in a larger number of issuers.
Recency Risk. The Fund is recently organized, giving prospective investors a limited track record on which to base their investment decision.
BTOP Risks
The Fund invests in Bitcoin Futures Contracts and Ether Futures Contracts. The Fund does not invest directly in or hold Bitcoin or Ethereum. As a result, the price of Bitcoin and Ether Futures Contracts should be expected to differ from the current cash price of bitcoin and Ethereum, which is sometimes referred to as the “spot” price. Consequently, the performance of the Fund should be expected to perform differently from the spot price of bitcoin and Ethereum. These differences could be significant. Investors seeking direct exposure to the price of bitcoin and Ethereum should consider an investment other than the Fund.
Risk of Loss. Bitcoin, Ethereum, Bitcoin Futures Contracts, and Ether Futures Contracts are relatively new investments. They are subject to unique and substantial risks, and historically, have been subject to significant price volatility. The value of an investment in the Fund could decline significantly and without warning, including to zero, and you may lose the full value of your investment within a single day. If you are not prepared to accept significant and unexpected changes in the value of the Fund and the possibility that you could lose your entire investment in the Fund you should not invest in the Fund.
Liquidity Risk. The market for Bitcoin and Ether Futures Contracts is still developing and may be subject to periods of illiquidity. During such times it may be difficult or impossible to buy or sell a position at the desired price. Market disruptions or volatility can also make it difficult to find a counterparty willing to transact at a reasonable price and sufficient size.
Cost of Futures Investment Risk. Bitcoin and Ether Futures Contracts have historically experienced extended periods of contango. Contango in the Bitcoin and Ether Futures Contracts market may have a significant adverse impact on the performance of the Fund and may cause Bitcoin and Ether Futures Contracts, and the Fund, to underperform the spot price of bitcoin or Ethereum.
Bitcoin Risk. Bitcoin is a relatively new innovation and the market for bitcoin is subject to rapid price swings, changes and uncertainty. Trading prices of bitcoin and other digital assets have experienced significant volatility in recent periods and may continue to do so.
Ethereum Risk. Ethereum is a relatively new innovation and the market for Ethereum is subject to rapid price swings, changes and uncertainty. The further development of the Ethereum Network and the acceptance and use of Ethereum are subject to a variety of factors that are difficult to evaluate. Ethereum is not legal tender and generally operates without central authority (such as a bank) and is not backed by any government. The slowing, stopping or reversing of the development of the Ethereum Network or the acceptance of Ethereum may adversely affect the price of Ethereum.
Borrowing Risk. The Fund may borrow for investment purposes using reverse repurchase agreements. The cost of borrowing may reduce the Fund’s return. Borrowing may cause a Fund to liquidate positions under adverse market conditions to satisfy its repayment obligations.
Frequent Trading Risk. The Fund regularly purchases and subsequently sells (i.e., “rolls”) individual futures contracts throughout the year so as to maintain a fully invested position. This frequent trading of contracts may increase the amount of commissions or markups to broker-dealers that the Fund pays when it buys and sells contracts, which may detract from the Fund’s performance.
Leverage Risk. The Fund seeks to achieve and maintain the exposure to the spot price of bitcoin and Ethereum by using leverage inherent in futures contracts. Therefore, the Fund is subject to leverage risk. As a result, these investments may magnify losses to the Fund, and even a small market movement may result in significant losses to the Fund. Leverage may also cause a Fund to be more volatile because it may exaggerate the effect of any increase or decrease in the value of the Fund’s portfolio securities.
New Fund Risk. The Fund is a recently organized investment company with a limited operating history. As a result, prospective investors have a limited track record or history on which to base their investment decision.
Nondiversification Risk. As a nondiversified fund, the Fund may hold a smaller number of portfolio securities than many other funds. The value of the Fund Shares may be more volatile than the values of shares of more diversified funds.
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