Bitwise launches ‘Optimum Roll’ bitcoin futures ETF

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Crypto investment manager Bitwise Asset Management has unveiled a new ETF in the US which provides exposure to bitcoin futures while utilizing an advanced rolling strategy in a bid to enhance returns.

The Bitwise Bitcoin Strategy Optimum Roll ETF (BITC US) has been listed on NYSE Arca with a management fee of 0.85%.

The fund offers investors regulated, professionally managed exposure to bitcoin through investing in standardized, cash-settled bitcoin futures contracts trading on the Chicago Mercantile Exchange.

The ETF seeks to outperform traditional bitcoin futures ETFs by minimizing potential pricing inefficiencies that can emerge in ETFs focused on front-month bitcoin futures contracts.

Specifically, front-month bitcoin futures ETFs may experience a performance drag if the bitcoin futures market is exhibiting a steep contango curve (where the forward price of the front-month contract is trading well above the spot price), forcing investors to suffer a significant negative roll yield as they sell their cheaper contracts to buy more expensive ones.

Optimized roll strategies aim to limit potential losses arising from rolling futures contracts in contango markets and maximize the benefit from rolling contracts in backwardation (where the forward price of the front-month contract is trading below the spot price).

In terms of BITC’s strategy, on a monthly basis, the ETF will consider all available contracts subject to liquidity requirements, selecting the contract maturity that exhibits the highest implied roll yield under current market conditions.

Matt Hougan, CIO of Bitwise Asset Management, commented: “Historically, optimum roll strategies in other asset classes, such as oil and natural gas futures, have outperformed strategies focused on front-month or near-month contracts over time. We believe this same strategy can apply to the bitcoin futures market as it continues to deepen and evolve. With the Bitwise Bitcoin Strategy Optimum Roll ETF, we’re excited to cater to long-term-oriented investors looking for regulated vehicles to gain directional bitcoin exposure.”

The ETF may be utilized by investors as a satellite holding as bitcoin’s distinct return pattern and historically low correlation to traditional stocks and bonds can offer long-term diversification benefits to portfolios.

Additionally, Bitwise notes that the fund’s structure as an SEC-regulated, “1940 Act” ETF is the format that is preferred by financial advisors seeking bitcoin exposure with a recent survey showing that over two-thirds (68%) of advisors favour the vehicle. Moreover, for tax reporting, the fund will issue a Form 1099 instead of the typically longer and more complex K-1.

Hunter Horsley, CEO of Bitwise Asset Management, said: “If there’s anything this past year has reinforced, it’s that how you invest in crypto is as important as what you invest in. The Bitwise Bitcoin Strategy Optimum Roll ETF gives institutions, advisors, and their clients a professional, regulated solution for adding exposure to bitcoin returns while bypassing the risks of custodying bitcoin directly or investing through novel platforms.”