Bitcoin Hitting New ATHs: Remaining bullish on crypto but getting cautious on Bitwise 10 Crypto Index Fund (BITW) due to the high NAV premium

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Bitcoin continues its climb, reaching new all-time highs (ATHs), and now sitting at ~$23,000. Crypto markets more broadly have continued to rally as well, leaving many investors looking for a means to gain asset class exposure. Many have turned to exchange listed trust products like Bitwise, which has seen prices sore lately. The rally which cooled during the latest session, has led to a sizable NAV premium, and we would caution investors against buying at current levels.

Bitcoin and crypto bull market continues. This week, Bitcoin pushed past $20,000 resistance to reach new all-time highs. Bitcoin has room before reaching our possibly conservative price target of $25,000 and we believe the crypto rally more broadly has room to continue. As underlying crypto prices have sharply risen, so has investor interest in gaining convenient cost-effective exposure to the asset class.

Exchange traded products fill a valuable market void. Difficulties, delays and security considerations associated with opening accounts at crypto exchanges and purchasing assets directly are frictions many investors seek to avoid by instead owning an ETP. ETPs give investors indirect crypto exposure via listed stock products that hold underlying crypto assets and are available for trading in traditional brokerage accounts. Grayscale and most recently Bitwise, which we released a report on earlier this year, are the two main players offering such products.

Bitwise 10 Crypto Index Fund listed on OTCQX last week. Last week, on December 9th, Bitwise 10 Crypto Index Fund (BITW) shares were listed for trading, making BITW the first publicly available crypto index fund for U.S. retail  investors. Shares have soared 451% since the listing, and an increasing premium to NAV has come along with it.

Recently increased premium offers increased downside risks. Bitwise BITW has a NAV of $20.2. The current price of $93 is a sizable 360% premium. Although competing products do trade at more elevated premiums, and we think there should be a premium because of enhanced liquidity, we also think in a few months it will be lower than this current premium. We believe long term investors should consider gaining exposure at more favorable levels.

Altcoins may benefit from BITW premium which may later reignite rally. We believe some accredited investors will opt to avoid the premium and purchase shares directly via a privet placement, which would increase demand on underlying alt coins held by BITW and could later help drive the fund NAV higher.

Bottom Line: We remain bullish on Bitcoin and crypto. And while we continue to like Bitwise the firm, the team, and the 10 Crypto Index Fund (BITW) product, we’re cautious of downside risks at these NAV Premium levels.

Key Charts from this report….

Bitwise Going Parabolic Post Listing But Risks Increasing Too (Slide 2)

Bitcoin Hitting New ATHs: Remaining bullish on crypto but getting cautious on Bitwise 10 Crypto Index Fund (BITW) due to the high NAV premium

Crypto Exchange Traded Products (ETPs) Market Share (Slide 3)…

Bitcoin Hitting New ATHs: Remaining bullish on crypto but getting cautious on Bitwise 10 Crypto Index Fund (BITW) due to the high NAV premium

Crypto ETPs Net Asset Value (NAV) Growth (Slide 4)…

Bitcoin Hitting New ATHs: Remaining bullish on crypto but getting cautious on Bitwise 10 Crypto Index Fund (BITW) due to the high NAV premium

Market Cap vs. NAV Crypto ETP Share (Slide 5)…

Bitcoin Hitting New ATHs: Remaining bullish on crypto but getting cautious on Bitwise 10 Crypto Index Fund (BITW) due to the high NAV premium

ETP NAV Premium Historical Evolution (slide 6)…

Bitcoin Hitting New ATHs: Remaining bullish on crypto but getting cautious on Bitwise 10 Crypto Index Fund (BITW) due to the high NAV premium

Liquidity Plays Key Role Influencing ETP NAV Premiums (Slide 7)…

Bitcoin Hitting New ATHs: Remaining bullish on crypto but getting cautious on Bitwise 10 Crypto Index Fund (BITW) due to the high NAV premium

ETP NAV Premiums Following Public Listing (Slide 8)…

Bitcoin Hitting New ATHs: Remaining bullish on crypto but getting cautious on Bitwise 10 Crypto Index Fund (BITW) due to the high NAV premium

Crypto Market Underlying Returns Drive Premiums (Slide 9)…

Bitcoin Hitting New ATHs: Remaining bullish on crypto but getting cautious on Bitwise 10 Crypto Index Fund (BITW) due to the high NAV premium

Disclosures (show)

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