Bitwise’s Bitcoin ETF receives BTC donations following transparency move Bitwise’s Bitcoin ETF receives BTC donations following transparency move
Some community members questioned the asset management firm choice of address following the disclosure.
2 min read
Updated: Jan. 25, 2024 at 11:53 am UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Asset management firm Bitwise garnered significant BTC contributions and praise from crypto community members following the public disclosure of its Bitcoin ETF Trust (BITB) on-chain address.
In a Jan. 24 post on social media platform X (formerly Twitter), Bitwise became the first U.S. bitcoin ETF to publish the addresses of its holdings. According to the firm, this initiative will facilitate the easy verification of BITB holdings, aligning with the core ethical principles of transparency within the BTC ecosystem.
“Publishing on-chain addresses is a first step toward increasing public transparency. As infrastructure evolves, we hope to do more, such as working with firms like Hoseki to provide real-time cryptographic attestations,” Bitwise added.
Bitwise’s BITB is among the best-performing ETFs among the “Newborn Nine.” According to official data on its website, the ETF holds 12,338 BTC, worth around $490 million, in its trust.
BTC donations
Following the public disclosure, the Bitwise address began to receive BTC donations and inscriptions from crypto community members.
Alexander Leishman, the CEO and CTO of BTC investment firm River, pointed out that an unnamed individual sent 6969 sats to the Bitwise ETF.
Mempool pseudonymous developer Mononaut also said that the Bitwise address got donated “an inscription of what I can only assume to be Elizabeth Warren.”
Meanwhile, the donations have sparked concerns about what this could mean for the ETF, with market analyst Dylan LeClair warning that the donations shouldn’t come from any non-OFAC compliant address.
Bloomberg Senior ETF analyst Eric Balchunas noted that this was the first time an underlying asset would be donated to an ETF. According to him, this was a groundbreaking moment because “the [only] way assets get into an ETF is only through the AP giving the issuer money.”
He added:
“This bypasses all that but no new shares created. I guess it could be treated like securities lending revenue and put back into the NAV like a rebate on the expense ratio.”
Concerns over address
Meanwhile, some community members raised alarms regarding Bitwise’s choice of address. Some questioned why it used a “legacy single sig address” for asset custody, while others raised issues about the absence of “test transactions” before asset transfers to the address.
In response to these queries, Hong Kim, Bitwise’s Co-founder and Chief Technology Officer, clarified that the firm’s custodial service provider, Coinbase Custody, employs a policy of not reusing addresses after spending. Consequently, the address undergoes rotation following a spend transaction.
“Coinbase manages multiple shards of the same key in their cold storage custody setup and rotates addresses after spend transaction but agree onchain multisig would be provably clearer,” Kim explained.
In addition, Kim reassured the community that Bitwise was actively pursuing an address upgrade to Taproot in collaboration with its custodian.
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Oluwapelumi Adejumo
Oluwapelumi values Bitcoin's potential. He imparts insights on a range of topics like DeFi, hacks, mining and culture, underlining transformative power.
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Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.
Bitwise
Bitwise Asset Management pioneered the first cryptocurrency index fund and is the leading provider of rules-based exposure to the cryptoasset space..
The Bitwise Bitcoin ETF (BITB) is a newly launched exchange-traded fund that provides investors with exposure to Bitcoin.
Eric Balchunas is an American author, ETF analyst, and Senior ETF Analyst at Bloomberg Intelligence.