Bitwise Files to Convert Three Futures-Based ETFs to New Trendwise Strategy

Highlights:

• Bitwise files to convert three futures-based ETFs to its Trendwise strategy by December 2024.
• The strategy rotates between crypto and U.S. Treasuries based on a proprietary momentum signal using 10- and 20-day EMAs.
• This change aims to minimize downside volatility by rotating between crypto and U.S. Treasuries based on market trends.

Bitwise Asset Management has filed to convert three of its futures-based crypto ETFs into new strategies, aiming to balance market volatility. According to the announcement, the firm plans to shift from long-only strategies to a more dynamic “Trendwise” strategy. This new approach will adjust investments between cryptocurrency futures and U.S. Treasuries based on market trends, according to the company’s filing.

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Today, Bitwise filed to convert our three crypto futures ETFs from long-only strategies to strategies that rotate between crypto futures and U.S. Treasuries exposure based on market trends.

Read the full press release below.

— Bitwise (@BitwiseInvest) October 4, 2024

New Strategy for Managing Volatility

The Trendwise strategy will rotate exposure between cryptocurrency futures and U.S. Treasuries, depending on market conditions. This approach is designed to manage downside risks while pursuing long-term price appreciation. 

Bitwise Chief Investment Officer Matt Hougan stated that the strategy follows a momentum-based model, relying on exponential moving averages (EMA) of crypto assets like Bitcoin and Ethereum. When the 10-day EMA rises above the 20-day EMA, indicating upward momentum, the funds will remain invested in crypto assets. If the reverse occurs, the strategy shifts to Treasuries.

The ETFs affected by this conversion include 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). Once converted, they will be renamed the Bitwise Trendwise Bitcoin and Treasuries Rotation Strategy ETF, Bitwise Trendwise Ethereum and Treasuries Rotation Strategy ETF, and Bitwise Trendwise BTC/ETH and Treasuries Rotation Strategy ETF, respectively.

No Changes to Costs or Tax Treatments

Despite the changes in strategy and fund names, Bitwise confirmed there will be no alterations to the funds’ expense ratios or tax treatment. Existing investors do not need to take any action to accommodate the changes. The firm emphasized that these adjustments aim to provide investors with a flexible option that can navigate the volatility of crypto markets by rotating into safer U.S. Treasuries during downturns. This strategy, according to Bitwise Chief Investment Officer Matt Hougan, capitalizes on market momentum.

Hougan stated:

“Momentum is a well-established factor in virtually every asset class, and it is powerful in crypto as well. He added that the Trendwise strategy seeks to “help minimize downside volatility and potentially improve risk-adjusted returns.”

Expansion Amid a Busy Year for Bitwise

Bitwise’s decision to revamp these ETFs comes during a particularly active year for the firm. Earlier in 2024, Bitwise launched its first spot Bitcoin and Ethereum exchange-traded products (ETPs) and filed for a spot XRP ETP with the U.S. Securities and Exchange Commission (SEC). 

James Seyffart, an ETF analyst at Bloomberg Intelligence, explained:

“They have an actively managed division within Bitwise, so it makes sense to give it a try. There are investors looking to invest in bitcoin but who want to limit the volatility and particularly the downside.”

With the crypto market facing continuous fluctuations, this move by Bitwise underscores its focus on offering products that can respond to market volatility. By rotating between crypto and Treasuries, Bitwise aims to balance higher-risk cryptocurrency investments with the relative stability of U.S. Treasuries, providing a safety net for investors during periods of market turbulence.

The changes to the ETFs align with feedback from clients seeking to limit exposure to crypto’s downside risks while remaining positioned to benefit from market upswings. The use of the “Trendwise” strategy is designed to give investors greater flexibility while maintaining long-term growth potential.

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