Company Name Bitwise Asset Management
Founders: Hong Kim and Hunter Horsley
Date founded: December 2016
The location of the headquarters: San Francisco, CA, and New York, NY
Bitcoins held by the Treasury Undisclosed
No. of Employees 65
Website: https://bitwiseinvestments.com/
Is it Public or Private? Even though they are not a public company,
Hong Kim’s co-founder, at Bitwise Asset Management (Bitwise), Hunter Horsely, were living the startup life — working from a living room in San Francisco and looking for a project that they could develop into a business.
Their friends would not stop talking about Bitcoin, even though they were trying out different ideas that didn’t seem to be gaining any traction. By early 2016, all venture capital firms in Silicon Valley were also focused on Bitcoin.
“We wanted to avoid it for a long time because [there was] too much hype,” Kim tells Bitcoin Magazine. “But then, just by osmosis, we spent more and more time thinking about it.”
After doing some research on Bitcoin in the last year, Kim and Horsely incorporated Bitwise. This was a crypto-asset management company that provided wrappers to bitcoins so customers could buy these assets through traditional brokers.
Bitwise is one of only 11 US-based firms that has issued an ETF for bitcoins. It’s the current leader in this category. 5th largest US spot bitcoin ETF as per the amount of assets under management (AUM). It’s partly due to Bitcoin enthusiasts, who bought it for the way Bitwise maintained Bitcoin’s ethos while it interfaced with Wall Street.
The Bitwise ETF vs. Other Bitcoin Exchange Traded Funds
The Bitwise Bitcoin ETF is different from the competition in a few ways.
Bitwise, for example, is the only US-based bitcoin ETF to publish the bitcoin addresses it holds, thus embracing transparency, which is a Bitcoin core principle.
An announcement: Bitwise Bitcoin ETF today became the first U.S. Bitcoin ETF to publicly publish its bitcoin addresses.
Now anyone can verify BITB's holdings and flows directly on the blockchain.
Onchain transparency is core to Bitcoin's ethos. We're proud to… pic.twitter.com/1JTUh3zvDE
— Bitwise (@BitwiseInvest) January 24, 2024
“Even now, many, many months have passed and still we’re the only Bitcoin ETF that discloses its holding addresses,” Kim said “You can go to a Bitcoin block explorer and check our on-chain holdings.”
Kim added that Bitwise was the only bitcoin ETF spot issuer to actively communicate with customers through social media.
“We are on Twitter talking about a product and answering questions,” Explained Kim
“I’ll explain anything and engage with the community. If there’s anything they’re upset about [regarding] the products, they can yell at us and we respond and take them seriously,” He also added.
Kim highlighted that Bitwise is still focused on Bitcoin. This makes Bitwise different than other bitcoin ETF issuers such as BlackRock or Invesco which manages a multitude of other asset types.
“We’ve been around for seven years or so and this is the only thing that we talk about,” Kim said
“When prices go down when there’s a bear market, We don’t rotate to emerging markets or fixed income or whatever,” He added.
“There might not be that big of a difference between BlackRock and Invesco or BlackRock or Franklin Templeton, but there’s a big difference between BlackRock and Bitwise.”
Bitwise also has a commitment to give away a portion of its profits. 10% of its ETF fee profits to three nonprofits that support Bitcoin Core developers — OpenSats, Brink Then, there is the Human Rights Foundation (HRF) — for 10 years.
Donating To Open-Source Developers
Kim believes that this donation is more an obligation than a sacrifice.
“As a Bitcoiner, I feel that it’s not really a donation,” Kim said
“The US taxpayer doesn’t think that they’re donating to the military budget,” He added.
“That’s not a donation. That’s your security budget.”
Kim explained that Bitwise also manages some other crypto-assets, but bitcoin makes up two thirds of its holdings. He sees supporting Bitcoin Core as a way to contribute the technology which supports his livelihood.
“If you’re like BlackRock, where you have all sorts of other [assets] and bitcoin is only one of them, then maybe you don’t feel that way,” Kim explained why Bitwise is more concerned about Bitcoin than other traditional financial institutions who have issued bitcoin spot ETFs.
“If you are like me or are in an economic situation like me and you care enough about Bitcoin, then it’s not an optional matter that the Bitcoin network is as secure as it can be,” He added.
Kim, Bitwise’s CTO with a background as a cybersecurity specialist, explained that open-source developers were essential for Bitcoin. Kim noted that people who are unfamiliar with open-source tech misunderstand what Bitcoin developer do. Kim, Bitwise’s CTO with a background in cybersecurity, explained why open-source developers are essential to Bitcoin. He noted that many people who don’t understand how open-source technology works misperceive what Bitcoin developers do.
“You can have an opinion about the latest contentious soft fork proposal or whatever, but 95% of the devs that we’re talking about don’t work on that,” Kim explained.
“The 50 or so core devs that do this day in and day out, that’s not what they’re spending time on. Whenever there’s a new version of Linux or Mac or Windows, guess what — we need to make sure that Bitcoin Core compiles on that version,” He continued.
“Somebody needs to make sure that the software we depend upon continues to be compatible, well-documented, and runnable.”
Mission: On A Mission
Kim is not satisfied with Bitwise’s ability to distinguish itself from the competition. He wants Bitwise, in addition to being among the best US ETF issuers of bitcoin spot prices, to be able to offer something even more significant.
“There are ways of thinking about a business as the product [it offers] or how it’s different from its competitors, but I think there’s another way of looking at a company as like, ‘What are you here to do?'” Explained Kim
Horsely says that they didn’t ask themselves the question at first, but it now seems to be on his mind.
“I want Bitwise to be the company that helps accelerate and guide this movement, because it’s such an important thing for the world to have public money that everyone can access and that nobody controls,” Kim said
Kim shared this and acknowledged that he thought many people might think as they read it: you’re exposing bitcoin’s value within the walls of traditional finance.
“TradFi and Bitcoin culture are inevitably colliding and people rightfully have concerns and some kind of dissonance about that,” Kim said “That was really top of mind for me.”
Kim reiterated this was the reason Bitwise decided to donate to Bitcoin developers who are open source, publicize their Bitcoin addresses and interact with the Bitcoin Community. He also revealed what Bitwise will be working on in the future: redeemable Bitcoin.
Bitcoin Redeemable
Bitwise is in Washington, DC, speaking to policymakers about enabling Bitwise to facilitate the redemption of bitcoins in kind from Bitwise’s Bitcoin ETF. Kim, in layman’s terms wants Bitwise clients to have the option to withdraw their bitcoin via ETF. Currently, Bitwise only allows customers to withdraw cash from the bitcoin they invested through bitcoin ETF.
“There are gold ETFs where you can redeem, even as an individual retail investor, and get gold coins and bars delivered to your door,” Explained Kim
“You redeem in-kind without incurring a taxable event. There’s no reason that a bitcoin ETF shouldn’t be able to do that,” He also added.
“That would be a product that I would be proud of.”
Kim thinks that spot bitcoin ETFs, like BITB, have the ability to be some of the largest on-ramps into Bitcoin if Bitwise is able to make redeemable Bitcoin a reality.
“Bitcoin ETFs are a huge improvement [in Bitcoin onboarding] in that most people have brokerage accounts,” Kim added that it was much easier to convince family and friends of the benefits of investing in bitcoin if they didn’t need to worry about setting up an exchange account.
“If your uncle at the Thanksgiving table is convinced and wants to put $100 into bitcoin, you no longer have to go, ‘Wait a minute. First buy a ledger for $40…’ [Now, it’s] just two taps and you have a hundred dollars worth of Bitcoin exposure,” He also added.
“But then, at any point in their journey, if they are so inclined, they can withdraw that. And in that sense, it can become a really clean and simple on-ramp.”
While Kim acknowledged that many are skeptical this will ever happen — speculating that Wall Street wants as much bitcoin within walled gardens as possible — he also noted that many felt the same way about the spot bitcoin ETFs ever being issued. Kim asked for patience while Bitwise continues to work on tearing down the barrier between Bitcoin and conventional finance.
“There’s a way of looking at Bitcoin ETFs as a clean and easy on-ramp and off-ramp and the lowest friction one for the average person,” Kim said
“That would be my ideal world, and that is a world that Bitwise is currently working on,” He added.
“In that world, the ETFs and the on-chain world aren’t as separate, but rather they can have a close relationship.”
“This article is not financial advice.”
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Source: bitcoinmagazine.com
