United States securities and exchange commission logo
January 5, 2024
Hunter Horsley
Chief Executive Officer
Bitwise Bitcoin ETF
c/o Bitwise Investment Advisers, LLC
250 Montgomery Street, Suite 200
San Francisco, CA 94104
Re: Bitwise Bitcoin ETF
Amendment No. 3 to
Registration Statement on Form S-1
Filed December 29,
2023
File No. 333-260235
Dear Hunter Horsley:
We have reviewed your amended registration statement and have the
following
comments.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe a comment applies to your
facts and circumstances
or do not believe an amendment is appropriate, please tell us why in
your response.
After reviewing any amendment to your registration statement and
the information you
provide in response to this letter, we may have additional comments.
Unless we note otherwise,
any references to prior comments are to comments in our December 14,
2023 letter.
Amendment No. 3 to Registration Statement on Form S-1
General
1. We note that your
registration statement includes a number of blanks or bracketed
information, including,
for example, the amount of Sponsor Fee, the Authorized
Participants with which
you have an agreement with at the time of effectiveness and the
party that has
indicated an interest in purchasing an aggregate of up to $200 million of
Shares in this offering
from Authorized Participants. Please revise to include this
information in your
next amendment. Please also file your Prime Execution Agreement
and Bitcoin Custody
Agreement in executed form. Further, please revise throughout to use
your new name where
applicable. For example purposes only, we note the Signature
Page.
Hunter Horsley
Bitwise Bitcoin ETF
January 5, 2024
Page 2
2. Please refer to comment 1 of our letter dated November 14, 2023. We
note your
disclosure on page 113 that you expect to use a fact sheet and that it
would be provided on
the Trust's website. To the extent that you intend to use a fact
sheet, please provide us
with a copy for our review.
3. Please revise throughout the prospectus to clarify, if true, that the
only crypto asset to be
held by the Trust will be bitcoin. In particular, please clarify, if
true, that with respect to
any fork, airdrop or similar event, the Sponsor will cause the Trust
to irrevocably abandon
the Incidental Rights or IR Virtual Currency, and in the event the
Trust seeks to change
this position, an application would need to be filed with the SEC by
your listing exchange
seeking approval to amend its listing rules. In addition, and for
example purposes only,
we note the following statements do not appear to be consistent with
page 20 of the Trust
Agreement which states that the Trust has explicitly disclaimed all
Incidental Rights and
IR Assets:
"In determining whether to attempt to acquire and/or retain any
Incidental Right(s)
and/or IR Asset(s)" on page 21.
"any Incidental Rights or IR Assets that the Trust may hold" on
page 108.
Cover Page
4. We note the disclosure regarding the Seed Shares purchased by Bitwise
Asset
Management. It is not clear why Bitwise Asset Management is identified
as a statutory
underwriter in connection with such purchase. In this regard, we note
the disclosure
regarding the Seed Baskets to be purchased by Bitwise Investment
Manager, which is
identified as a statutory underwriter in connection with the purchase
of the Seed Baskets.
5. Please revise to disclose the number and price of the Seed Baskets
that Bitwise Investment
Manager intends to purchase.
Purchases and Sales of Bitcoin, page 3
6. Please revise your disclosure to identify the Bitcoin Trading
Counterparties.
Risk Factors, page 10
7. We note your response to prior comment 6. Please tell us why the Bitcoin
Custodian
acting in the same capacity for several competing products does not pose
a material risk if,
when you are utilizing the Agent Execution Model, your purchase and
sales needs are in
conflict or competition with the purchase and sales needs of competing
products that are
also relying on Coinbase Inc., an affiliate of the Bitcoin Custodian, to
purchase or sell
bitcoin. Please consider, for example, whether a market disruption or
other circumstance
FirstName LastNameHunter Horsley
whereby no Bitcoin Trading Counterparty is able or willing to effectuate
your purchase or
Comapany
sale NameBitwise Bitcoin
of bitcoin would causeETF
you and also your competitors to rely on
the Agent Execution
JanuaryModel.
5, 2024 Page 2
FirstName LastName
Hunter Horsley
FirstName LastNameHunter Horsley
Bitwise Bitcoin ETF
Comapany
January NameBitwise Bitcoin ETF
5, 2024
January
Page 3 5, 2024 Page 3
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The amount of bitcoin represented by a Share will decline over time, page 36
8. We note your response to prior comment 8 and reissue the comment. On
page 37, you
refer to "Shares that are issued in exchange for additional deposits
of bitcoin" and, on
page 36, to the "Authorized Participants' ability to purchase and sell
bitcoin in an efficient
manner to effectuate creation and redemption orders." Please revise
here and throughout
to clarify that creations of Shares will be cash transactions. In this
regard, we note your
disclosure on page 8 that "[i]t is currently anticipated that all
sales and redemptions of
Shares will be done in exchange for U.S. dollars and only in
transactions with Authorized
Participants." Although you state in your response letter that you
deleted the referenced
disclosure, it remains.
Conducting creations and redemptions for cash has drawbacks, page 43
9. We note your revised disclosure that "[i]n the near term, the Trust
will effect all of its
creations and redemptions in cash, rather than in-kind." We have the
following comment:
Please confirm your understanding, consistent with the undertaking
required by Item
512(a)(1)(iii) of Regulation S-K, that you will file a
post-effective amendment to
include any material information with respect to the plan of
distribution not
previously disclosed in the registration statement or any material
change to such
information.
The Trust and Bitcoin Prices
Purchase and Sale of Bitcoin, page 62
10. We note your response to prior comment 21. Please disclose who pays
for the transfer fee
with respect to the on-chain transfer of bitcoin from the Bitcoin
Custodian to the Bitcoin
Trading Counterparty in connection with redemptions.
BRRNY Methodology, page 65
11. We note your response to prior comment 12, and we reissue in part.
Please revise to
disclose how the Trust will notify Shareholders if there is a material
change to the
BRRNY Methodology. Although you disclose how you will notify
Shareholders of
changes to the Constituent Platforms used to calculate the BRRNY, you
do not
disclose how the Trust will notify Shareholders if there are other
material changes to the
BRRNY Methodology.
Calculation of NAV, page 68
12. Refer to your responses to comment 7 in our September 29, 2023 letter
and related
subsequent comments. We note your revised disclosure that the Trust
will only allow cash
redemptions, and observe that this change may have an impact on your
fair value
accounting policy, including principal market determination under ASC
Topic 820. Please
confirm your understanding that our decision not to issue additional
comments should not
Hunter Horsley
FirstName LastNameHunter Horsley
Bitwise Bitcoin ETF
Comapany
January NameBitwise Bitcoin ETF
5, 2024
January
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FirstName LastName
be interpreted to mean that we either agree or disagree with your
responses and your
current fair value accounting policy. Please also confirm your
understanding that we may
comment further on this matter in future filing reviews once the Trust
is operational.
13. We note your response to prior comment 14. Please disclose how the ITV
is calculated
based upon the CME Bitcoin Real Time Price. Although you discuss how
the CME
Bitcoin Real Time Price is calculated, you state that the ITV is
"based" upon the CME
Bitcoin Real Time Price, without discussing how the ITV itself is
actually calculated. In
addition, please revise the third-to-last sentence of the first
paragraph on page 69,
which appears to be an incomplete thought.
Additional Information About the Trust
The Trust's Fees and Expenses, page 71
14. We note your response to prior comment 5. Please revise to disclose on
page 71 how you
will undertake bitcoin sales to pay for expenses not assumed by the
Sponsor, if no Bitcoin
Trading Counterparty is willing or able to effectuate the trade.
State, if true, that you will
use the Agent Execution Model.
15. We note your response to prior comment 15. Please disclose who is
responsible for paying
the transaction costs related to the sale of bitcoin to generate funds
to pay the Trust's fees
and expenses.
Custody of the Trust's Assets, page 78
16. We note your response to prior comment 9. Please revise your
disclosure to explicitly
state whether the commercial crime policy that Coinbase Global
maintains, as discussed
on pages 78 and 81, is separate from the commercial crime policy that
the Coinbase
Insureds maintain, as discussed on pages 79 and 81. Additionally,
explicitly state whether
this policy or these policies are separate from the insurance policy
that the Bitcoin
Custodian maintains, as discussed on pages 6, 45, and 101. Also, to
the extent that any of
these are separate policies, please ensure that you are disclosing the
coverage amounts and
all material terms.
The Prime Execution Agent and the Trade Credit Lender
The Trade Credit Lender, page 85
17. Please revise to quantify or otherwise describe the maximum amount of
Trade Credit that
the Trade Financing Agreement permits to be outstanding at any one
time. Please also
disclose whether the intention is to generally fund the Trading
Balance at the Prime
Execution Agent with sufficient cash or bitcoin or whether it
regularly expects to utilize
the Trade Financing Agreement. In addition, to the extent the
execution price of the
bitcoin acquired exceeds the cash deposit amount, disclose who bears
the responsibility
for this difference. Further, for creation and redemption
transactions, please revise to
clarify whether or not the interest payable on Trade Credits utilized
under the Trade
Financing Agreement are included in the execution price and therefore
the responsibility
Hunter Horsley
Bitwise Bitcoin ETF
January 5, 2024
Page 5
of the Authorized Participants. If they are the responsibility of the
Trust, please revise
your risk factor disclosure accordingly to explain the impact such
interest payments will
have on the net assets of the Trust over time.
Management; Voting by Shareholders, page 98
18. We note your response to prior comment 3. Please disclose here the
"limited
circumstances" under which shareholders have voting rights under the
Trust Agreement.
Governing Law; Consent to Delaware Jurisdiction, page 99
19. We note your response to prior comment 22. Please revise this section to
disclose, as
stated in Section 10.02 of your First Amended and Restated Declaration of
Trust and Trust
Agreement, that the Delaware governing law provision does not apply to
causes of action
for violations of U.S. federal or state securities laws, or advise.
Material Contracts, page 100
20. We note your response to comment 18. Please revise to disclose the term
of the Bitcoin
Custody Agreement and the Prime Execution Agreement. Also disclose, as
stated in your
response letter, that you have given no instructions to the Bitcoin
Custodian as it relates to
Incidental Rights and IR Assets.
Please contact Kate Tillan at 202-551-3604 or Michelle Miller at
202-551-3368 if you
have questions regarding comments on the financial statements and related
matters. Please
contact John Dana Brown at 202-551-3859 or Sandra Hunter Berkheimer at
202-551-3758 with
any other questions.
Sincerely,
FirstName LastNameHunter Horsley
Division of
Corporation Finance
Comapany NameBitwise Bitcoin ETF
Office of Crypto
Assets
January 5, 2024 Page 5
cc: Richard J. Coyle
FirstName LastName