Bitwise, a leading cryptocurrency asset management firm, is exploring the potential of launching an exchange-traded product (ETP) dedicated to Ethereum’s layer 2 ecosystems and applications. Matt Hougan, the Chief Investment Officer at Bitwise, shared his enthusiasm and a touch of self-admonishment over the firm’s absence in this niche market during a Forbes interview on March 31.
Exploring Ethereum’s Evolving Ecosystem
Hougan expressed his “extraordinary confidence” in the Ethereum ecosystem’s growth trajectory. However, he acknowledged the uncertainty surrounding which layer 2 solutions and applications will ultimately prevail. Given the rapidly changing landscape and the expectation of numerous decentralized applications gaining popularity, Hougan sees value in an investment product that encompasses the entirety of this ecosystem.
The conversation also touched on the upcoming Dencun upgrade for Ethereum, which Hougan believes is significantly undervalued by the market. He described the upgrade as a “complete game changer,” suggesting that its full impact has yet to be appreciated by investors.
Anticipating Spot Ether ETFs
Despite the excitement around Ethereum’s advancements, Hougan tempered expectations for the timely introduction of a spot Ethereum ETF. He voiced concerns that the financial advisory sector might not be prepared for such a development by May, given the recent approval of spot Bitcoin ETFs. Hougan speculated that a launch later in the year, possibly December, would be more conducive to market readiness.
Bitwise has officially filed with the SEC to list a spot Ether ETF as of March 28, joining a list of prominent firms vying for regulatory approval. These applicants include BlackRock, VanEck, ARK 21Shares, Fidelity, Grayscale Hashdex, Franklin Templeton, and Invesco Galaxy, with many in the industry eyeing May as a crucial period for potential approvals.
While some analysts have grown skeptical of the SEC’s readiness to approve spot Ether ETFs, citing recent interactions with applicants, others remain optimistic. Grayscale’s chief legal officer, Craig Salm, suggested that the procedural groundwork laid by spot Bitcoin ETFs could facilitate the acceptance of spot Ether ETFs, highlighting advancements in asset protection, loss prevention, and custody among other areas.
Bitwise’s Position in the Crypto ETF Space
As one of the 11 issuers of spot Bitcoin ETFs, Bitwise’s Bitwise Bitcoin ETF (BITB) has successfully attracted over $1.6 billion in flows, ranking fourth behind other major ETFs according to BitMEX Research data as of March 28. This track record underscores Bitwise’s significant role and expertise in the cryptocurrency ETF market, setting a solid foundation for its foray into Ethereum’s layer 2 space.
Bitwise’s consideration of an Ethereum layer 2-focused ETP signifies a strategic move to capture the growth and innovation within Ethereum’s decentralized finance (DeFi) sector. As the ecosystem continues to evolve, Bitwise aims to offer investors a diversified entry point into this dynamic market, balancing cautious optimism with a keen eye on regulatory developments and market readiness.
