Company Name: Bitwise Asset Management
Founder: Hong Kim and Hunter Horsley
Date of Establishment: December 2016
Headquarters Location: San Francisco, California and New York, New York
Amount of Bitcoin held in the Treasury: Not disclosed
Number of employees: 65
Website: https://bitwiseinvestments.com/
Public or private? Private
In 2016, Hong Kim and Hunter Horsley, co-founder of Bitwise Asset Management, were living the startup life, working out of their living room in San Francisco, looking for projects they could turn into businesses.
While experimenting with various ideas, none of them gained much traction, my friends kept talking about Bitcoin, and by early 2016, every venture capital firm in Silicon Valley was focused on Bitcoin.
“We wanted to avoid it for a long time because there was so much (hype),” Kim told Bitcoin Magazine. “But just by osmosis, we spent more and more time thinking about it.”
By the end of the year, Kim and Horsley had completed their research on Bitcoin and founded Bitwise, a Bitcoin-focused cryptocurrency asset management company that offered a wrapper around Bitcoin so clients could buy the asset through traditional brokerages.
Eight years later, Bitwise is one of 11 U.S. companies to issue a spot Bitcoin ETF, and it is currently the fifth-largest U.S. spot Bitcoin ETF by assets under management (AUM). This is partly due to Bitcoin enthusiasts buying into it because of the way Bitwise has maintained the Bitcoin spirit while staying connected to Wall Street.
Bitwise vs. All Other Spot Bitcoin ETF Issuers
There are several factors that set the Bitwise Bitcoin ETF (BITB) apart from its competitors.
First, Bitwise is the only company to issue a U.S. spot Bitcoin ETF that discloses its Bitcoin holding addresses, embracing the concept of transparency, a core Bitcoin principle.
Announcement: Today, the Bitwise Bitcoin ETF (BITB) became the first U.S. Bitcoin ETF to publicly disclose its Bitcoin holdings.
Now anyone can check BITB’s stake and flow directly on the blockchain.
On-chain transparency is at the heart of Bitcoin’s ethos. We… pic.twitter.com/1JTUh3zvDE
— Bitwise (@BitwiseInvest) January 24, 2024
“Even after so many months, we are still the only Bitcoin ETF that is disclosing our holdings,” Kim said. “You can go to any Bitcoin block explorer and verify your on-chain holdings.”
Kim also emphasized that Bitwise is the only Bitcoin ETF issuer that actively engages with customers through social media.
“We talk about products and answer questions on Twitter,” Kim explained.
“I will explain anything and engage with the community. If they are upset about something about the product, they can yell at us and we respond and take it seriously,” he added.
Kim also noted that Bitcoin remains Bitwise’s primary focus, which makes the firm very different from other spot Bitcoin ETF issuers, such as BlackRock or Invesco, who manage a variety of asset classes.
“We’ve been doing this for about seven years, and this is all we talk about,” Kim said.
“When prices fall in a bear market, we do not invest in emerging markets or bonds,” he added.
“There may not be that much difference between BlackRock and Invesco or BlackRock and Franklin Templeton, but there is a big difference between BlackRock and Bitwise.”
Finally, Bitwise has pledged to donate 10% of its ETF fee revenue to three non-profits that support Bitcoin Core developers: OpenSats, Brink, and the Human Rights Foundation (HRF) for 10 years.
Donate to open source developers
While many in the Bitcoin community have praised Bitwise for donating to Bitcoin Core developers, Kim sees the donation as more of an obligation than a sacrifice.
“As a Bitcoiner, I don’t think it’s really a donation,” Kim said.
“American taxpayers don’t think they’re contributing to the military budget,” he added.
“That’s not a donation. That’s your security budget.”
Kim explained that while Bitwise manages other crypto assets, two-thirds of the company’s holdings are in Bitcoin, which is why he sees supporting Bitcoin Core developers as contributing to the technology that supports his livelihood.
“If you have a company like BlackRock that holds all sorts of different (assets) and Bitcoin is just one of them, you might not think so,” Kim said of why a company like Bitwise would be more interested in bitcoin than some of the larger traditional financial institutions that have issued spot bitcoin ETFs.
“If you’re like me or in my financial situation and you care enough about Bitcoin, it’s not optional that the Bitcoin network is as secure as possible,” he added.
Kim, CTO of Bitwise, who has a background in cybersecurity, explained why open source developers are essential to Bitcoin, noting that many people who don’t understand how open source technology works misunderstand what Bitcoin developers do. He argued that most Bitcoin developers are not there to make radical changes to Bitcoin, but to maintain functionality when interfacing with other software.
“You can have an opinion on the controversial soft fork proposal or something, but 95% of the developers we talk to aren’t involved in that,” Kim explained.
“The 50 or so core developers who do this day in and day out are not spending their time. Every time a new version of Linux or Mac or Windows comes out, they have to make sure that Bitcoin Core compiles on that version,” he continued.
“Someone needs to make sure that the software we rely on remains compatible, well-documented, and executable.”
With a mission
While Bitwise goes to great lengths to differentiate itself from its competitors, Kim wants Bitwise to do something deeper than simply being one of the top spot Bitcoin ETF issuers in the U.S.
“There’s one way to think about a company as a product—what it offers—or as what makes it different from its competitors, but I think there’s another way to think about a company as, ‘What are we here to do?’” Kim explained.
He said he and Horsley didn’t ask themselves that question right away, but it seems to be at the forefront of his mind now.
“I want Bitwise to be the company that accelerates and guides this movement, because having public money that everyone can access and that no one can control is so important to the world,” Kim said.
After sharing this article, Kim acknowledged what many people are likely thinking upon reading it: that he is providing exposure to the Bitcoin price within the closed environment of traditional finance.
“TradFi and Bitcoin culture are inevitably going to clash, and people are understandably concerned about that and have some kind of dissonance,” Kim said. “That was really top of mind for me.”
Kim reiterated that this is why Bitwise decided to donate to open-source Bitcoin developers, publish Bitcoin addresses, and engage with the Bitcoin community. And he also shared information about what Bitwise is working on next: redeemable Bitcoin.
Redeemable Bitcoin
Bitwise is currently discussing with policymakers in Washington, D.C., an effort to facilitate Bitwise redeeming bitcoin for cash in the Bitwise Bitcoin ETF. In layman’s terms, Kim would like Bitwise customers to be able to withdraw the bitcoin they invested in the ETF if they so choose, but currently, customers can only withdraw the cash value of the bitcoin they invested in the Bitcoin ETF.
“There are gold ETFs that even individual investors can redeem and have gold coins and bullion delivered to their homes,” Kim explained.
“You can redeem it for cash without triggering a taxable event. There’s no reason a Bitcoin ETF couldn’t do that,” he added.
“It will be a product I can be proud of.”
Kim believes that if Bitwise can make redeemable bitcoin a reality for investors, spot bitcoin ETFs like BITB have the potential to become the biggest on-ramp to bitcoin.
“A Bitcoin ETF is a huge improvement (to Bitcoin onboarding) in that most people have a brokerage account,” Kim said, adding that it would be much easier to get family and friends to invest in Bitcoin since they wouldn’t have to go through the hassle of setting up an account at a Bitcoin or cryptocurrency exchange.
“If your uncle at the Thanksgiving table wants to invest $100 in Bitcoin, he no longer has to say, ‘Wait a minute, buy a $40 ledger first…’ (Now) it only takes two taps and you have $100 worth of Bitcoin exposure,” he added.
“But at any point in their journey, if they feel so inclined, they can back out. And in that sense, it can be a really clean and simple onramp.”
Kim acknowledged that many people are skeptical that this will happen, but speculated that Wall Street wants as much Bitcoin as possible within its walled garden. He also noted that many people share the same view about a spot Bitcoin ETF being issued. He asked for patience as Bitwise continues its efforts to break down the wall between Bitcoin and traditional finance.
“There are ways in which a Bitcoin ETF could be viewed as the least frictionless and cleanest on-ramp and entry point for the average person,” Kim said.
“That’s the world I envision as ideal, and that’s the world that Bitwise is working on right now,” he added.
“In that world, the ETF and on-chain worlds may not be so separate, but rather may have a close relationship.”