Bitwise integrates its cryptocurrency futures ETF, launching BITC for Bitcoin and U.S. Treasury rotation, reducing downside risk for Bitcoin.

With the emergence of spot ETFs, interest in futures-based crypto ETFs has decreased. Bitwise is converting its three futures-based crypto ETFs, including BITC, AETH, and BTOP, into a new single fund called the Bitwise Trendwise Bitcoin and Treasury Rotation Strategy ETF (BITC). The fund's expense ratio or tax treatment will not change, and existing investors in the funds do not need to take any action.

According to its prospectus, the BITC aims to achieve its investment objective through managing bitcoin futures contracts and investments in US treasuries. Under normal market conditions, the fund will invest at least 80% of its assets in bitcoin futures contracts and US treasuries, rather than directly in bitcoin spot.

The fund employs a "long-flat" trend-following investment strategy, which focuses on market trends. The core idea is to determine the investment direction based on the trend of market prices, investing long when the market trend is clear, and staying flat when the market trend is unclear or volatile.

Based on this strategy, Bitwise rotates the fund exposure between 100% bitcoin futures contracts and 100% US treasuries using proprietary signals based on bitcoin, specifically the 10-day and 20-day exponential moving averages (EMA). When the 10-day average is above the 20-day average, the fund manager determines a bullish trend for bitcoin and increases the allocation to bitcoin futures contracts, up to 100%. However, when a bearish trend is identified, the fund may invest all assets in US treasuries, resulting in a period of no exposure to bitcoin futures contracts.

Even during periods when the fund nominally holds 100% bitcoin futures contracts, up to 75% of the remaining assets may be invested in US treasuries, other US government securities, money market funds, cash, and cash equivalents. This is because futures contracts only require margin collateral, allowing the remaining funds to be invested in liquid assets to earn returns.

Bitwise founder Matt Hougan stated:

Momentum is a crucial investment factor. The new trend-following strategy utilizes momentum factors to rotate between cryptocurrencies and treasuries based on market direction. The goal is to minimize downside volatility of bitcoin and potentially enhance risk-adjusted returns.