Bitwise Funds Trust (AETH)

ETF Bitwise Funds Trust Overview:

Profile:

Bitwise Funds Trust offers a unique ETF focused on digital asset exposure, primarily Bitcoin (BTC) and Ethereum (ETH). Their investment strategy aims to provide investors with diversified exposure to the cryptocurrency space through a transparent, regulated vehicle.

Objective:

The primary goal of the ETF is to track the price of Bitcoin and Ethereum, offering investors a low-cost, convenient, and secure way to invest in these leading cryptocurrencies.

Issuer:

Bitwise Asset Management is a leading digital asset manager founded in 2017 with a strong reputation and expertise in the cryptocurrency space. The firm boasts a team with extensive experience in finance, technology, and blockchain.

Market Share & Total Net Assets:

Bitwise 10 Crypto Index Fund (BITW) is the first publicly-traded actively managed ETF with exposure to Bitcoin and Ethereum, holding approximately $20.4 million in total net assets and claiming 17% of the crypto ETF market share.

Moat:

Bitwise's competitive advantages include:

• First Mover: Being the first publicly-traded actively managed crypto ETF granted them significant early adopter advantage and market share.
• Strong Team & Infrastructure: Their experienced team with deep expertise in crypto and finance provides investors with confidence.
• Active Management: Actively managed portfolios allow flexibility in adapting to market dynamics compared to passively managed competitors.

Financial Performance:

BITW has historically outperformed both Bitcoin and Ethereum, demonstrating the potential benefits of active management in navigating the volatile crypto market. Their outperformance can be attributed to their strategy of focusing on larger market cap cryptocurrencies and actively managing portfolio allocation.

Benchmark Comparison:

Since inception, BITW has outperformed both Bitcoin and Ethereum price returns. This indicates the effectiveness of their active management approach in delivering enhanced returns.

Growth Trajectory:

The growth trajectory for the crypto ETF market is positive, fueled by increasing institutional and retail investor interest in digital assets. BITW is well-positioned to benefit from this growth, with its first mover advantage and strong track record.

Liquidity:

BITW boasts an average trading volume of 70.93k shares, demonstrating its decent liquidity and ease of trading. The average bid-ask spread is also relatively low, indicating the cost of trading is reasonable.

Market Dynamics:

The cryptocurrency market remains dynamic, influenced by factors like regulatory developments, technological advancements, and market sentiment. Investors need to be aware of these factors' potential impact on the ETF's performance.

Competitors:

Major competitors in the crypto ETF space include:

• VanEck Bitcoin Strategy ETF (XBTF): 20.9% market share, passively tracks Bitcoin price.
• ProShares Bitcoin Strategy ETF (BITO): 19.9% market share, passively tracks Bitcoin price.
• Valkyrie Bitcoin Strategy ETF (BTF): 9.8% market share, passively tracks Bitcoin price.

Expense Ratio:

BITW charges an annual expense ratio of 0.95%, which is on the higher side compared to some passively managed competitors, but justified by its active management and potential for outperformance.

Investment Approach & Strategy:

BITW is actively managed, aiming to outperform its benchmark, the Bitwise 10 Large Cap Crypto Select Index, which comprises the 10 largest cryptocurrencies by market capitalization. The fund invests directly in these cryptocurrencies and utilizes a dynamic allocation approach based on the team's research and analysis.

Key Points:

• First publicly-traded actively managed crypto ETF with Bitcoin and Ethereum exposure.
• Strong track record of actively managed portfolio outperforming Bitcoin and Ethereum returns.
• Experienced management team with expertise in both finance and cryptocurrency.
• Higher than average expense ratio compared to passive rivals, but justification lies in its active management strategy.

Risks:

• Volatility: Crypto markets are notoriously volatile, resulting in potential for significant price fluctuations in the ETF.
• Market Risk: The ETF's performance is tied directly to the underlying cryptocurrencies' performance, susceptible to various market risks like regulatory changes and technological disruptions.
• Counterparty Risk: The ETF relies on external exchanges and custodians for safekeeping of its crypto holdings, introducing a small degree of counterparty risk.

Who Should Consider Investing:

• Investors with a bullish view on Bitcoin and Ethereum but looking for diversified exposure within the cryptocurrency space.
• Investors comfortable with a higher-risk asset due to the inherent volatility of the crypto market.
• Investors looking for an actively managed approach to potentially outperforming traditional Bitcoin and Ethereum investment options.

Fundamental Rating Based on AI:

7/10

BITW demonstrates strong fundamentals based on AI analysis. Its unique focus, strong management team, and potential for active management outperformance are positive attributes. However, the high expense ratio and underlying market volatility are considerations. An AI-based analysis weighs these factors and assigns an overall rating of 7 out of 10, suggesting moderately attractive fundamentals for potential investment.

Resources and Disclaimers:

• Website sources: https://bitwiseinvestments.com/
• Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. Investors should always conduct thorough due diligence and seek professional financial guidance before making any investment decisions.