Osprey Funds Shifts Gears with Bitcoin Trust Conversion
In a bold strategic move, Osprey Funds has announced its intention to convert its bitcoin trust into an exchange-traded fund (ETF). This pivot comes on the heels of the collapse of its acquisition deal with Bitwise Asset Management and amidst growing competition in the bitcoin ETF market.
A Changing Landscape
The Securities and Exchange Commission’s (SEC) approval of spot bitcoin products last year has sparked a frenzy of activity in the market. Established players are now vying for market share, and Osprey Funds is determined to stay ahead of the curve. The Fairfield, Connecticut-based firm plans to file a Form S-1 registration statement with the SEC by the end of January, marking a significant shift in its strategy.
From Acquisition to Conversion
The termination of Osprey’s asset purchase agreement with Bitwise, which failed to secure necessary regulatory approvals by the Dec. 31 deadline, has prompted the firm to reassess its approach. In March 2023, Osprey had considered selling or liquidating the trust after units traded at a discount to bitcoin’s value. However, with the ETF conversion strategy, the company is now poised to capitalize on the growing demand for bitcoin investment products.
Tracking Bitcoin’s Performance
The Osprey Bitcoin Trust (OBTC) currently tracks bitcoin’s price using the Coin Metrics CMBI Bitcoin Index as a reference point for performance. The trust holds the underlying bitcoin with Fidelity Digital Asset Services serving as the custodian. Despite facing challenges, OBTC has seen its unit price rise nearly 158% over the past year. However, the fund’s performance has been marked by volatility, with the unit price dropping from $50 at launch in February 2021 to $30.54 currently.
A Familiar Path
Osprey Funds’ conversion attempt follows similar moves in the crypto investment space, including the recent conversions of Grayscale’s Bitcoin Trust ETF (GBTC) in January 2024. The firm’s ongoing lawsuit against Grayscale, filed in January 2023, alleges that Grayscale’s advertising misled investors about the likelihood of its trust becoming an ETF, allowing it to dominate the bitcoin trust market.
Regulatory Review
The SEC is currently reviewing various crypto fund applications, including the Bitwise 10 Crypto Index Fund, which has had its review period extended to March 5. As the regulatory landscape continues to evolve, Osprey Funds’ bold move is likely to have significant implications for the crypto investment market.
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