Company Name: Bitwise Asset Management
Founders: Hong Kim and Hunter Horsley
Date Founded: December 2016
Location of Headquarters: San Francisco, CA and New York, NY
Amount of Bitcoin Held in Treasury: Undisclosed
Number of Employees: 65
Website: https://bitwiseinvestments.com/
Public or Private? Private
In 2016, Hong Kim and his co-founder Hunter Horsley were navigating the ups and downs of startup culture — working from a San Francisco living room while seeking a viable business venture.
During their exploration of various concepts, they were continually inundated with discussions about Bitcoin from their friends. By early 2016, the buzz around Bitcoin had also captured the attention of every venture capital firm in Silicon Valley.
“We resisted for quite a while because there was just too much hype,” Kim told Bitcoin Magazine. “But eventually, we found ourselves increasingly intrigued by it.”
By year-end, after thorough research into Bitcoin, Kim and Horsley had founded Bitwise, a crypto asset management firm centered on Bitcoin, designed to offer wrappers for customers to acquire these assets through traditional brokerage channels.
Fast forward eight years, and Bitwise has established itself as one of just 11 US firms to launch a spot Bitcoin ETF; it currently ranks as the 5th largest US spot Bitcoin ETF by assets under management (AUM). This success can be attributed in part to the enthusiastic Bitcoin advocates who have chosen to invest, appreciating Bitwise’s commitment to maintaining the Bitcoin ethos while engaging with Wall Street.
Bitwise vs. Other Bitcoin ETF Issuers
Several key factors set the Bitwise Bitcoin ETF (BITB) apart from its competitors.
First, Bitwise is the only US-based spot Bitcoin ETF issuer that publicly discloses its Bitcoin holding addresses, championing transparency — a fundamental principle of Bitcoin.
Announcement: Today the Bitwise Bitcoin ETF (BITB) becomes the first U.S. bitcoin ETF to publish the bitcoin addresses of its holdings.
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 with many months having passed, we’re still the only Bitcoin ETF that reveals its holding addresses,” Kim noted. “You can effortlessly navigate to a Bitcoin block explorer and verify our on-chain holdings.”
Moreover, Kim emphasized that Bitwise is the sole spot Bitcoin ETF issuer that actively interacts with its clients via social media.
“We use Twitter to discuss our products and address inquiries,” Kim explained.
“I’m open to dialogue and community engagement. If clients have any frustrations regarding our products, they can voice their concerns directly, and we take them seriously,” he added.
Additionally, Kim pointed out that Bitcoin is Bitwise’s primary focus, distinctly positioning the company compared to other Bitcoin ETF issuers like BlackRock or Invesco, who handle a diverse range of asset types.
“For us, this is our single focus for the past seven years,” Kim stated.
“In bear markets, we don’t pivot to emerging markets or fixed-income assets,” he added.
“While there might be minor distinctions among firms like BlackRock and Invesco, a significant difference exists between BlackRock and Bitwise.”
Furthermore, Bitwise has pledged 10% of its ETF fee revenues to three nonprofits supporting Bitcoin Core developers — OpenSats, Brink, and the Human Rights Foundation (HRF) — for ten years.
Supporting Open-Source Developers
Although many in the Bitcoin community commend Bitwise for contributing to Bitcoin Core developers, Kim views this initiative as more of a responsibility than a concession.
“As a Bitcoiner, I perceive this not just as a donation,” Kim remarked.
“It’s akin to how US taxpayers don’t regard their contributions to the military budget as donations,” he explained.
“That’s not a donation. That’s your security budget.”
Kim elaborated that while Bitwise does oversee other crypto holdings, Bitcoin constitutes two-thirds of the company’s portfolio. Therefore, he sees support for Bitcoin Core developers as a means of sustaining the technology that supports his livelihood.
“For firms like BlackRock, which possess a variety of other assets with Bitcoin as just one component, the viewpoint may differ,” Kim stated regarding why Bitwise prioritizes Bitcoin more than larger traditional financial institutions that have launched Bitcoin ETFs.
“For those of us who genuinely care about Bitcoin, ensuring that the Bitcoin network remains as secure as possible becomes non-negotiable,” he stressed.
Kim, who serves as Bitwise’s CTO and has a background in cybersecurity, articulated the critical role of open-source developers in Bitcoin, clarifying that many misunderstand the function of Bitcoin developers. He argued that most developers aren’t aiming for radical changes but rather ensure the system remains operational as it interacts with other software.
“While opinions may differ on contentious soft fork proposals, 95% of the developers we discuss don’t focus on that,” Kim explained.
“The core developers dedicating themselves to this work day in and day out are instead ensuring that Bitcoin Core compiles correctly with new versions of operating systems like Linux or Mac or Windows,” he continued.
“Someone must guarantee that the software we rely on stays compatible, well-documented, and operational.”
On a Mission
Although Bitwise endeavors to set itself apart from its rivals, Kim aspires for the company to fulfill a deeper purpose beyond merely being an exceptional US spot Bitcoin ETF issuer.
“You can analyze a business in terms of its products or its competitive advantages, but there’s another perspective to consider: ‘What is your mission?’” Kim articulated.
Initially, he and Horsley didn’t approach their journey with that mindset, but it has since become a primary focus for him.
“I envision Bitwise as a company that accelerates and steers the Bitcoin movement because it’s imperative for the world to have universally accessible public currency that no one controls,” Kim expressed.
After sharing this vision, Kim acknowledged potential concerns from readers: You’re providing access to Bitcoin’s value within the confines of traditional finance.
“The intersection of traditional finance and Bitcoin culture is creating a collision, which rightfully raises concerns and dissonance,” Kim admitted. “That’s been a significant consideration for me.”
He reiterated that this underlying reason motivated Bitwise to donate to open-source Bitcoin developers, publish their Bitcoin addresses, and engage with the Bitcoin community. He also provided insight into Bitwise’s current projects, including redeemable Bitcoin.
Redeemable Bitcoin
Bitwise is actively engaging with policymakers in Washington, DC, aiming to facilitate in-kind redemptions of Bitcoin from the Bitwise Bitcoin ETF. In simple terms, Kim wants Bitwise customers to have the option to withdraw the actual Bitcoin they’ve invested in via the ETF, rather than just the cash equivalent currently allowed.
“There are gold ETFs that allow retail investors to redeem their investments and receive gold coins and bars delivered to their homes,” Kim explained.
“Redemption occurs in-kind without triggering a taxable event. There’s no reason Bitcoin ETFs shouldn’t offer this option,” he asserted.
“That would be a product I would take great pride in.”
Kim believes if Bitwise can bring redeemable Bitcoin to fruition for investors, spot Bitcoin ETFs like BITB could serve as significant gateways to Bitcoin.
“Bitcoin ETFs drastically improve onboarding, especially since most individuals have brokerage accounts,” Kim noted, adding it’s easier to persuade family and friends to invest in Bitcoin without going through the complexities of creating an account with a crypto exchange.
“If your uncle wants to invest $100 in Bitcoin during Thanksgiving, there’s no longer a need for him to first buy a ledger for $40. Now, you just need two taps to give him $100 worth of Bitcoin exposure,” he explained.
“Then, if at any point in their investment journey, they desire, they can withdraw that Bitcoin. This accessibility can provide a straightforward and seamless onboarding experience.”
While Kim recognized skepticism surrounding this possibility — speculating that Wall Street prefers keeping Bitcoin within controlled environments — he also reminded many once held similar doubts about the issuance of spot Bitcoin ETFs. He implored patience as Bitwise continues to dismantle barriers between Bitcoin and traditional finance.
“We can view Bitcoin ETFs as accessible on-ramps and off-ramps with minimal friction for the average investor,” Kim stated.
“That’s the ideal scenario I envision and it’s the reality Bitwise is actively pursuing,” he concluded.
“In that scenario, ETFs and the on-chain world can coexist and nurture a close relationship.”
