10-Q: Bitwise Ethereum ETF Reports First Financials Since Launch, Waives Fees on Initial Assets

Bitwise Ethereum ETF files its first quarterly report, detailing initial financials and a fee waiver on the first $500 million of assets.

Summary

• Bitwise Ethereum ETF (ETHW) filed its first quarterly report on Form 10-Q for the period ended June 30, 2024.
• The Trust's investment objective is to provide exposure to the value of ether, less expenses.
• As of June 30, 2024, the Trust's net assets were $200, with 8 shares outstanding at a net asset value of $25 per share.
• The Trust commenced operations on July 22, 2024, and the shares are listed on NYSE Arca under the ticker ETHW.
• The Sponsor, Bitwise Investment Advisers, LLC, has agreed to waive the entire Sponsor Fee on the first $500 million of Trust assets through January 22, 2025.
• The Sponsor will accrue at an annual rate of 0.20% of the Trust's net assets beginning thereafter.
• The Trust is an emerging growth company and has elected not to use the extended transition period for complying with new or revised accounting standards.
• The Trust's sole asset is ether, and it establishes its net asset value (NAV) by reference to the CME CF Ether Dollar Reference Rate New York Variant (Pricing Benchmark).

Sentiment

Score: 7

Explanation: The sentiment is neutral to positive. The ETF is newly launched and waiving fees on initial assets is a positive sign. However, the limited operating history and dependence on the price of ether introduce risks.

Positives

• The Sponsor is waiving the entire Sponsor Fee on the first $500 million of Trust assets through January 22, 2025, which benefits early investors.
• The Trust has a clear investment objective: to provide exposure to the value of ether.
• The Trust is listed on NYSE Arca, providing investors with an efficient means to obtain market exposure to the price of ether.
• The Trust has engaged reputable service providers, including BNY Mellon as Administrator and Coinbase Custody Trust Company, LLC as Ether Custodian.

Negatives

• The Trust has limited operating history, with operations commencing on July 22, 2024.
• The Trust's financial statements for the period ended June 30, 2024, reflect minimal activity, with net assets of only $200.
• The Shares may trade at a premium or discount to the NAV per Share due to price volatility and market conditions.

Risks

• The value of the Shares is subject to the risks associated with investments in ether, including price volatility and regulatory uncertainty.
• The Trust is dependent on the Sponsor for its operations and management.
• The Trust may incur extraordinary expenses that are not assumed by the Sponsor.
• The Trust is subject to risks related to technology developments regarding the use of ether and other crypto assets.

Future Outlook

The Trust seeks to provide exposure to the value of ether, less expenses, and will continue to operate as an Exchange Traded Product (ETP) listed on the NYSE Arca.

Industry Context

This announcement is part of the ongoing development of cryptocurrency-based investment products, reflecting the increasing interest in providing investors with regulated and accessible exposure to digital assets.

Comparison to Industry Standards

• The Bitwise Ethereum ETF is similar to other cryptocurrency ETFs, such as the Grayscale Ethereum Trust (ETHE) and the Purpose Ether ETF (ETHH.B), which aim to provide exposure to ether.
• The Sponsor Fee of 0.20% per annum, after the waiver period, is competitive with other cryptocurrency ETFs.
• The Trust's reliance on the CME CF Ether Dollar Reference Rate New York Variant for NAV calculation is a common practice among cryptocurrency ETFs.

Related Party Transactions

• Bitwise Asset Management, Inc. (BAM), the parent company of the Sponsor, purchased 8 Shares at $25.00 per Share.
• Bitwise Investment Manager, LLC (BIM), an affiliate of the Sponsor, purchased the initial 100,000 Shares of the Trust (the Seed Baskets) for $2,500,000, at a per-Share price of $25.00.

Stakeholder Impact

• Shareholders will benefit from the Sponsor's fee waiver on the first $500 million of Trust assets through January 22, 2025.
• Authorized Participants will be able to purchase and redeem Shares in cash-settled transactions.
• The Trust's service providers, including the Ether Custodian and Administrator, will receive fees for their services.

Next Steps

• The Trust will continue to purchase and sell ether directly and create or redeem its Shares in cash-settled transactions with Authorized Participants.
• The Trust will pay the Sponsor Fee of 0.20% per annum of the Trust's ether holdings after the waiver period ends on January 22, 2025.
• The Trust will monitor and comply with regulatory requirements and accounting standards.

Key Dates

Keywords

Bitwise Ethereum ETF, Ethereum, ETF, ETHW, Ether, Cryptocurrency, Sponsor Fee, Financial Report, Digital Assets