Bitwise Avalanche ETF Filing News: Structure, Custody, price and Risks

Bitwise has officially filed an S-1 registration statement with the U.S. Securities and Exchange Commission (SEC) for the Bitwise Avalanche ETF, which is a proposed spot-based exchange-traded product. The relocation is indicative of an increasing institutional investment in AVAX and another step towards introducing crypto assets to mainstream financial markets.

Bitwise Avalanche ETF: An Introduction

This is slated to be a spot-based trust product, meaning that it will actually hold the Avalanche tokens and not some type of futures or derivative. The ETF's shares will be based on the value of AVAX held by the trust, minus the fees and expenses, which means that traditional investors will be able to gain exposure without having to directly maintain digital wallets.

The Bitwise Avalanche ETF aims to offer investors regulated exposure to the cryptocurrency known as AVAX through direct ownership of the cryptocurrency. Being set up as a spot-based trust, it removes the self-custody requirement and connects traditional finance to blockchain assets.

Source: Official SEC website

Structure and Custody

• Trust Formation: The Bitwise ETF will be formed as a Delaware statutory trust under the Delaware Statutory Trust Act.

• Custodian: Coinbase Custody Trust Company, LLC will be protecting the AVAX holdings. Although not FDIC-insured, Coinbase Custody provides private insurance coverage.

• Sponsor: Bitwise Investment Advisers, LLC will act as the sponsor and oversee the operations of the trust.

Valuation and Pricing

The ETF will be based on the CME CF Avalanche-Dollar Reference Rate - New York Variant, which is administered by CF Benchmarks Ltd., to calculate the daily value of Tokens.

• Net Asset Value (NAV): This is computed daily with the help of the reference rate.

• Indicative Trust Value (ITV): Published every 15 seconds, during the trading hours, based on the CME Avalanche Real Time Price.

This will guarantee openness and proper pricing to investors.

Issues of Creation and Redemption of Shares

• Basket Size: Shares will be sold and repurchased in 10,000 block shares.

• Mechanism Authorized Participants can redeem or create baskets in-kind AVAX or in cash.

• Sponsor Fee: There will be a management fee charged as a percentage of Avalanche holdings, although the exact number has not been revealed yet.

Risks and Challenges

The filing points to some of the risks of the proposed ETF:

• Volatility: Avalanche is highly volatile, like other cryptocurrencies, and is prone to sharp price fluctuations.

• Regulatory Risk: Tokens could have an impact on trading, custody, and compliance if it is considered a security by the SEC or the courts.

• Custody Issues: The risks are loss of private keys, errors in blockchains, or breach of custody by a custodian.

• Tracking Risk: The shares may trade at premiums or discounts to AVAX's market price.

• Operation Risk: Forks, governance conflicts, or network issues in the blockchain may impact the Exchange Traded Fund.

Pending Details

Some of the details are not disclosed in the filing:

• The ticker symbol has not been determined.

• The exchange in which the ETF will list is yet to be confirmed.

• The specific percentage of management fees is redacted.

Conclusion

The proposed Bitwise Avalanche ETF is a major step towards the mainstream adoption of AVAX in the U.S. capital markets. By providing controlled access to tokens, Bitwise hopes to make it easier for institutions and individuals to invest in AVAX if they prefer to use traditional financial products. If approved, this could help increase the visibility and adoption of AVAX in the global finance world.