Crypto Index Fund Seeks to Break New Ground
The Securities and Exchange Commission (SEC) has extended its review period for NYSE Arca’s proposal to list shares of the Bitwise 10 Crypto Index Fund (BITW) as an exchange-traded product. This move sets a critical deadline of March 3 for the regulator to either approve or reject the conversion of the $1.4 billion fund.
A Key Test for Multi-Crypto Investment Vehicles
The proposal, initially filed on November 14, seeks to convert BITW from its current over-the-counter trading status to a fully regulated ETP structure. If successful, this would mark a significant milestone for multi-crypto investment vehicles, paving the way for others to follow suit.
Addressing Premium/Discount Issues
The fund currently holds 10 cryptocurrencies, with bitcoin comprising 72.7% of the portfolio, followed by Ethereum at 14.7% and XRP at 5.8%. By converting to an ETP structure, BITW aims to address its premium/discount issues through creation/redemption mechanisms. This would provide investors with a more efficient and transparent way to trade the fund.
Challenges of Over-the-Counter Trading
Over-the-counter trading typically presents challenges for investors, including reduced liquidity and a higher chance of fraud or stock manipulation compared to exchange-listed products. The fund currently trades at $60.95, while its net asset value stands at $71.72, highlighting the pricing gaps that an ETP structure aims to minimize.
SEC’s Extended Review Period
The SEC has received no public comments on the proposal during the initial review period. The commission’s extended review of BITW’s conversion proposal aligns with its standard 45-day extension period, commonly used when reviewing novel financial products. This additional time will allow regulators to assess how a multi-crypto index product would function within an exchange-traded structure.
A Critical Deadline Looms
The March 3 deadline gives regulators a critical window to evaluate the proposal and determine whether BITW can successfully transition into an exchange-traded security. If approved, this would mark a significant step forward for the crypto industry, providing investors with a more regulated and transparent way to access a diversified portfolio of cryptocurrencies.
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