Alternative Investments: A New WisdomTree Alternative ETF Will Invest in Bitcoin
The WisdomTree Enhanced Commodity Strategy Fund seeks returns uncorrelated to equity or fixed income.
A filing by WisdomTree for the proposed WisdomTree Enhanced Commodity Strategy Fund shows it intends to invest up to 5% of its net assets in bitcoin futures contracts. The fund would invest the balance of the funds in four commodity sectors. These are energy, agriculture, industrial metals, and precious metals. The investments would primarily be in futures contracts. The fund will not invest directly in bitcoin or in physical commodities. (Coindesk)
SEC roadblocks to bitcoin ETFs
The SEC has steadfastly blocked various applications for the launch of bitcoin ETFs, the last one from New York-based Wilshire Phoenix.
The regulator said Wilshire had not proven the bitcoin market is sufficiently resistant to market manipulation. This, even though Wilshire based its ETF proposal on U.S. Treasury bonds in addition to bitcoin, rebalancing the two to counter the latter’s volatility.
Other grounds for the SEC’s rejection have been the size of the BTC market, safe custody of BTC, and surveillance arrangements.
Rising institutional interest in bitcoin
Open interest in bitcoin options on the Chicago Mercantile Exchange (CME) has surged from a minuscule $4 million to $373 million over the past three months.
Last month, open interest in bitcoin futures on the CME surged to new all-time highs. It led to speculation that hedge funds and other institutions were getting into the cryptocurrency market.
This development could be fortuitous for the proposed WisdomTree Enhanced Commodity Strategy Fund. That’s provided it is approved by the SEC.
Wisdomtree already has a BTC product on the SIX exchange
In December 2019, WisdomTree introduced its first cryptocurrency exchange-traded product with the launch of the WisdomTree Bitcoin exchange-traded product (ETP) in Europe.
The ETP has an expense ratio of 0.95% and each share in the ETP corresponds to 1/100th of a Bitcoin. Furthermore, it is backed by a coin entitlement stored using institutional-grade storage solutions.
At the time of the launch, Jonathan Steinberg, CEO of WisdomTree, said: “Much like how the ETP structure has outshone the mutual fund structure in significant ways, blockchain and cryptocurrencies have the potential to change how investors participate in financial markets globally.”
Related Story: Bloomberg’s Bitcoin Analysis – $20K in 2020
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