Asset managers are expanding their product offerings in response to the growing interest. Bitwise launched an exchange-traded funds (ETFs) to track companies with significant Bitcoin reserves. This gives investors indirect exposure. Cboe BZX, meanwhile, is requesting regulatory approval for the introduction of staking in Fidelity’s Ethereum ETF. This could increase returns to investors.
Cboe pushes for stakes in Fidelity’s Ethereum ETF amidst SEC review
Cboe BZX, a securities exchange in the United States, is seeking approval to incorporate staking within Ethereum ETFs. Cboe BZX, according to an 11th March filing, has requested formal permission from US Securities and Exchange Commission to integrate staking in Fidelity’s Ethereum ETF.
This would be a major shift for the ETF industry, as it allows institutional investors and retail traders to receive staking incentives directly through their ETF investments. The filing comes after Cboe made a previous attempt to allow staking on the 21Shares Core Ethereum ETF back in February. This signals a wider strategy of integrating staking into regulated investments vehicles.
Investors earn rewards by staking ETH. According to Staking Reward, as of March 11, an estimated annual percentage (APR), denominated by ETH, for staking Ether was around 3.3%.
If approved by Cboe, the proposed rule change would permit Fidelity Ethereum Fund “to stake, or cause to have staked” all or part of its ether via one or more trusted providers. This could increase returns to investors, while still maintaining their exposure to Ethereum price fluctuations.
Staking isn’t just available on Ethereum. Staking is also available on other major cryptos, such as Solana. This feature has become a key component in digital asset investment.
Crypto industry will closely monitor the SEC decision. Notably, since US President Donald Trump’s second term began on Jan. 20, the SEC appears to have softened its stance on cryptocurrency-related financial products.
The SEC confirmed in February that over a dozen filings were made by exchanges relating to crypto ETFs. These included those focusing on option trading, redemptions-in-kind, and the creation of new altcoin fund types. This trend, while regulatory uncertainty still exists, suggests that the administration could be more flexible with crypto regulations.
Cboe Expands Crypto ETF Expansion Plan
Cboe has been actively increasing its cryptocurrency ETF offering. Cboe has asked permission to list WisdomTree’s and Canary’s proposed XRP ETFs, and facilitate the creation and redemption of in-kind for Fidelity’s Bitcoin (BTC), and Ethereum (ETH), ETFs.
Stake and ETF changes could be a major impact on the cryptocurrency investment landscape if SEC approves these proposals.
The SEC’s approval of staking on Fidelity’s Ethereum ETF would be a major milestone for US crypto ETFs. This decision could include:
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Encourage ETF providers with staking options to do the same.
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Increase institutional adoption by making Ethereum ETFs more appealing as investment products that generate passive income.
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Support Ethereum’s staking eco-system, because more ETH will be locked in the network. This could reduce liquid supply, and have an impact on price dynamics.
SEC must evaluate risks and implications for allowing ETFs to be staked. Staking will need to be evaluated in terms of whether it introduces new counterparty risk or other challenges related custodianship, liquidity and custody.
Analysts and investors are eagerly awaiting SEC response. This could establish a precedent on how stakes will be integrated in traditional US financial market investment vehicles.
Cboe’s call for stakes in Fidelity’s Ethereum ETF is a major development in the space of crypto ETFs. The SEC’s review of the proposal could change the institutional participation in Ethereum stakes and expand the appeal for crypto-based ETFs.
Bitwise Launches ETF Tracking Companies With Large Bitcoin Holdings
The asset management company Bitwise announced that it had launched an ETF focused on large Bitcoin (BTC ) holding companies on March 11, 2019.
Bitwise Bitcoin Standard Corporations ETF is designed to track a stock index of companies with at least 1,000 BTC held in corporate treasuries. The Bitwise Bitcoin Standard Corporations ETF (OWNB) is designed to track an equity index that includes companies who hold at least 1,000 BTC in their corporate treasuries.
Many people ask: “Why do companies hold Bitcoin?” Matt Hougan is Bitwise’s chief investment officer. He said that the answer to this question was simple. “For exactly the same reasons as people,” he explained. These companies view Bitcoin as an asset of strategic value that is liquid, scarce and not susceptible to government whims.
OWNB was designed to provide investors with exposure to publically traded companies that have large holdings of Bitcoin. The index weights BTC holdings, and the biggest single holding is capped at 20 percent.
The ETF’s largest holdings as of 11 March include:
MicroStrategy, led by Michael Saylor, is the biggest corporate Bitcoin holder, holding over 214,000 BTC worth more than $41 Billion.
Companies that mine bitcoins include:
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Marathon Digital Holdings, Inc. (MARA).
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CleanSpark CLSK
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The Riot Platforms
Some other firms that have significant Bitcoin holdings include:
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Galaxy Digital is a cryptocurrency-focused investment company.
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Boyaa Interactive is a company that specializes in gaming.
OWNB’s launch coincides with a rapid increase in corporate Bitcoin holdings. According to BitcoinTreasuries.NET, as of March 11, companies collectively hold over $54 billion worth of BTC, reflecting a sharp increase in corporate interest in Bitcoin as a store of value.
MicroStrategy is the largest corporate Bitcoin holder, with $41 billion worth of BTC. MicroStrategy stock is up more than 350% in 2024. This closely tracks Bitcoin’s appreciation, and has solidified its position as the de facto Bitcoin Fund for institutional investors.
Multiple factors are responsible for the trend seen in publicly-traded companies to accumulate Bitcoin:
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Bitcoin is a Hedge Against Inflation – With increasing concerns about inflation and devaluation of fiat currencies, many companies are using Bitcoin to protect themselves against monetary debasement and currency expansion.
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The Digital Gold Narrative and Scarcity – Bitcoin is a rare asset because of its fixed supply. Corporations view it as an equivalent of gold in terms of a value store.
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Bitcoin is accepted by institutions – Bitcoin has gained recognition as a traditional financial instrument, and corporations have begun to allocate reserves in BTC for diversification of their balance sheets.
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It’s a good time to buy Bitcoin in the US. The SEC has approved Bitcoin ETFs for early 2024, which is a great boost for corporates.
There are other Bitcoin Treasury ETFs in the Horizon
Bitwise isn’t the only asset management company looking to capitalise on the trend towards corporate Bitcoin treasuries. Similar investment products have also been developed by other firms.
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Strive Asset Management’s Bitcoin Bond ETF. In December Strive Asset Management (founded by Vivek RAMASWAMMA, former US Presidential candidate) applied to the SEC for approval of an ETF that invests in convertible bonds issued corporate Bitcoin holders.
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REX Shares Bitcoin Treasury Fund – REX Shares, a leading asset manager, announced on March 10 that it would launch an ETF specifically targeting Bitcoin holding companies.
Bitwise Bitcoin Standard Corporations ETF OWNB reflects a trend of institutional Bitcoin adoption. Investors can now gain exposure to BTC heavy corporations, without having to buy Bitcoin directly.
Success of the ETF is dependent on corporate continued interest in Bitcoin, and developments regarding regulatory issues surrounding financial products based on cryptography. One thing is certain: Corporate Bitcoin treasuries will be around for a long time. Investors now have a way to access this new sector.
