Bitwise is making waves again. They just filed for an ETF that’s based on their 10 Crypto Index Fund, and it's got me thinking about a few things. First off, this fund is heavily tilted towards Bitcoin and Ethereum—75% Bitcoin and 16% Ethereum to be exact. That leaves a tiny sliver for everything else, which includes some interesting players like Solana and Ripple. But why go so heavy on the big two? And what does this mean for altcoins?
The Bitcoin and Ethereum Dominance
Let’s break it down. The reason for the heavy weighting isn’t just because they can; it’s reflective of reality. Bitcoin and Ethereum have been the backbone of the crypto market, usually accounting for a whopping 60-80% of total market cap.
Bitwise has another strategy out there—the Equal Weight Strategy that gives both assets equal footing—but this new proposed one isn’t about balance; it’s about acknowledging who the big players are.
Diversification or Concentration?
Now, you might think having ten cryptocurrencies in a fund would be diversified enough. But when eight of them are essentially sidelined, it raises questions. This concentration could be seen as risky if you believe altcoins have potential upside (or further downside if you’re bearish).
The proposed ETF isn't even as diversified as their other strategies which are basically just two funds: one that concentrates on Bitcoin and one that concentrates on Ethereum.
Regulatory Climate: A Game Changer?
Here’s where things get really interesting—Gary Gensler just resigned! His departure could open the floodgates for crypto ETFs, especially since he was known for his stringent regulatory approach.
The crypto market seems to think so too; it shot up after news of his resignation broke. Could we be entering an era where approval of spot Bitcoin ETFs becomes routine? If so, wouldn’t it make sense to file an ETF that actually has some diversification beyond two assets?
Altcoins in Managed Funds: A Strategic Necessity
Now let’s talk about Solana and other altcoins like it. They serve multiple purposes in managed crypto trading funds:
- Diversification: They help spread risk.
- Liquidity: Larger trades can pose risks in less liquid markets.
- Active Management: Fund managers need to constantly adjust based on market conditions.
Altcoins can enhance diversification but also come with their own set of challenges—like liquidity risks which fund managers must navigate carefully.
Summary
Bitwise's filing brings up some important discussions about diversification strategies in crypto asset management, especially given how concentrated their proposed fund is.
With Gary Gensler out, could we see a more favorable regulatory environment? One thing seems clear: if history teaches us anything, it's that altcoins will continue to play an essential role in managed crypto trading funds—whether or not they get their moment in the spotlight during this next potential bull run remains to be seen!
