Bitwise: Bridging the Gap Between Bitcoin and Wall Street
The world of Bitcoin and traditional finance can seem like two opposing forces. One is decentralized and peer-to-peer, the other centralized and regulated. Yet, Bitwise Asset Management, a company founded in 2016 by Hong Kim and Hunter Horsley, is on a mission to bridge this gap, bringing the benefits of Bitcoin to a broader audience through traditional financial structures.
Bitwise began with a simple goal: to offer investors a way to access Bitcoin through familiar investment vehicles. This mission led them to become one of the first U.S. firms to issue a spot Bitcoin ETF, the Bitwise Bitcoin ETF (BITB), now ranking among the top 5 in terms of assets under management (AUM).
While offering Bitcoin exposure through a traditional ETF might seem like a compromise, Bitwise has diligently worked to ensure their product aligns with the core values of Bitcoin: transparency, decentralization, and community focus.
Transparency Through On-Chain Proof
In a bold move, Bitwise became the first US Bitcoin ETF to publish the addresses of its Bitcoin holdings, allowing anyone to verify the fund’s holdings and flows directly on the blockchain. This commitment to transparency, a cornerstone of Bitcoin, sets Bitwise apart from other ETF issuers.
"Even now, many, many months have passed and still we’re the only Bitcoin ETF that discloses its holding addresses," Kim emphasized. "You can go to a Bitcoin block explorer and check our on-chain holdings."
This dedication to transparency reinforces Bitwise’s commitment to Bitcoin’s core principles, reassuring investors that their investments are aligned with the values they believe in.
Engaging with the Bitcoin Community
Beyond transparency, Bitwise distinguishes itself through its proactive communication with the Bitcoin community. Unlike other ETF issuers, Bitwise actively engages on social media, openly discussing its product and answering community questions.
"I’ll explain anything and engage with the community. If there’s anything they’re upset about [regarding] the products, they can yell at us and we respond and take them seriously," Kim stated.
This open dialogue fosters trust and builds a sense of shared purpose between Bitwise and the Bitcoin community, furthering the company’s commitment to transparency and accountability.
Bitcoin as a Core Focus
Bitwise’s commitment to Bitcoin goes beyond just providing an ETF. The company prioritizes Bitcoin above all other digital assets, unlike many other market players who diversify across various asset classes.
"We’ve been around for seven years or so and this is the only thing that we talk about," Kim explained. "When prices go down when there’s a bear market, We don’t rotate to emerging markets or fixed income or whatever."
This single-minded focus on Bitcoin allows Bitwise to remain closely aligned with the community’s interests and values, contributing to a deeper understanding and appreciation of the technology.
Supporting the Foundation of Bitcoin
Bitwise further reinforces its commitment to Bitcoin through a unique initiative: donating 10% of its ETF fee profits to three nonprofits, OpenSats, Brink, and the Human Rights Foundation (HRF), which support Bitcoin Core developers for a decade.
Kim views this not as a donation but as an investment in the future of Bitcoin: "As a Bitcoiner, I feel that it’s not really a donation. The US taxpayer doesn’t think that they’re donating to the military budget. That’s not a donation. That’s your security budget."
This contribution recognizes the vital role of open-source developers in maintaining and improving the Bitcoin network, ensuring its long-term stability and security.
The Crucial Role of Open-Source Development
Kim sheds light on the often overlooked work of Bitcoin Core Developers, explaining that their efforts extend beyond radical changes and into the crucial maintenance of the Bitcoin network.
"You can have an opinion about the latest contentious soft fork proposal or whatever, but 95% of the devs that we’re talking about don’t work on that," Kim said. "The 50 or so core devs that do this day in and day out, that’s not what they’re spending time on. Whenever there’s a new version of Linux or Mac or Windows, guess what — we need to make sure that Bitcoin Core compiles on that version."
Bitwise’s support acknowledges the vital role of these developers in ensuring Bitcoin’s compatibility and functionality across different platforms, a critical aspect of the network’s continued evolution.
A Bigger Mission: Accelerating Bitcoin Adoption
For Bitwise, however, their mission extends beyond just providing a product. Kim envisions Bitwise as a catalyst for accelerating and guiding the broader adoption of Bitcoin: "I want Bitwise to be the company that helps accelerate and guide this movement, because it’s such an important thing for the world to have public money that everyone can access and that nobody controls."
While Bitwise operates within the realm of traditional finance, it acknowledges the inherent tension between this world and Bitcoin’s decentralized ethos.
"TradFi and Bitcoin culture are inevitably colliding and people rightfully have concerns and some kind of dissonance about that," Kim admitted.
This understanding drives Bitwise’s efforts to bridge the gap, through transparency, community engagement, and supporting open-source development, ensuring their actions align with Bitcoin’s core principles.
The Future: Redeemable Bitcoin
Bitwise is now working on creating redeemable Bitcoin, allowing investors to withdraw their Bitcoin holdings directly from the ETF, mimicking the redemption process of gold ETFs.
"There are gold ETFs where you can redeem, even as an individual retail investor, and get gold coins and bars delivered to your door," Kim explained. "You redeem in-kind without incurring a taxable event. There’s no reason that a bitcoin ETF shouldn’t be able to do that."
This innovative approach has the potential to revolutionize Bitcoin onboarding by making it easier for investors to access and exit the market, streamlining the process and making Bitcoin even more accessible.
Bridging the Gap for a Better Future
While facing skepticism and potential pushback from traditional financial institutions, Bitwise remains steadfast in its efforts to create a smoother path between Bitcoin and mainstream finance.
"There’s a way of looking at Bitcoin ETFs as a clean and easy on-ramp and off-ramp and the lowest friction one for the average person," Kim said. "That would be my ideal world, and that is a world that Bitwise is currently working on."
Bitwise’s commitment to core Bitcoin values alongside its efforts to innovate within the established financial system creates a unique position, offering a path towards a future where Bitcoin and traditional finance can coexist and thrive, ultimately contributing to a more inclusive and accessible financial world.
