The first cryptocurrency index fund has made its debut in OTC markets. Bitwise's large-cap index fund, the Bitwise 10 Index Fund (BITW), is listed on OTCQX and can be traded using brokerage accounts. The fund has $120 million in assets under management and will track the Bitwise 10 Large Cap Crypto Index, which is a market capitalization-weighted index holding 10 of the largest cryptocurrencies, representing 80% of the overall value of crypto markets.

Its top holdings, as of this writing, are Bitcoin (75%) and Ether (13%), and the rest consists of other cryptocurrencies such as XRP and litecoin. According to the company's press release, the fund was up by 184% in value this year. Bitwise has partnered with Coinbase, a leading cryptocurrency exchange, for custody of its assets.

Key Takeaways

  • Developed by Bitwise, the Bitwise 10 Index Fund (BITW) is the first crypto index fund listed on OTC markets.
  • The fund is intended to expand the universe of crypto investing products and is aimed at financial advisors.

A Product Aimed at Financial Advisors

Due to the volatile nature of cryptocurrency markets, most investment products using them are for accredited investors, or investors who have a much higher tolerance for risk than retail investors. Such products are often expensive and trade at a premium because they provide access to Bitcoin, a scarce asset whose value has increased in the past couple of months.

Bitwise also followed the tried-and-tested route and already has funds aimed at the same category of investors. However, this is the company's first foray into designing an investment vehicle aimed at financial advisors and, by extension, retail investors. Bitwise had previously submitted applications for a Bitcoin exchange-traded fund (ETF), but the SEC rejected those applications. 

Thus far, financial advisors have been hesitant to recommend Bitcoin or cryptocurrencies to their clients, but Bitwise has a theory for why this is so. "Financial advisors are eager for a safe and easy way to allocate to crypto for clients," Matt Hougan, chief investment officer at Bitwise, told Coindesk, adding that the fund's diversified nature meant that it will help investors gain exposures to other cryptocurrencies beyond Bitcoin.

Hougan also made special mention of the differences between BITW another popular crypto investment vehicle, Grayscale's Digital Large Cap Fund (GDLC). The latter, which is also traded on OTC markets, does not track an index and has a management fee that is higher than that of Bitwise's fund. Those differences, however, add diversity to the crypto-investing products available in the current market.