VanEck and Bitwise said the two investment firms are seeding their Bitcoin ETFs with $72.5 million and $500,000, respectively, according to S-1 documents filed with the SEC on Monday.
S-1 forms disclose important information to the financial regulator, such as the company's business model, financial statements, details about its management team, and any legal or competitive risks.
Seeding, or seed capital, refers to funds provided to launch an Exchange Traded Fund (ETF). While banks and broker-dealers often provide seed capital, ETFs can self-seed with new capital or existing assets, as in this case.
In addition to its $500,000 seed basket, Bitwise—which claims to be the largest crypto index fund manager in America—is offering up a $200 million investment opportunity, with investment firm Pantera Capital among potential purchases.
“Pantera Capital Management LP, through one or more of its affiliated investment funds, has indicated an interest in purchasing an aggregate of up to $200 million of Shares in this offering from Authorized Participants or in the marketplace through broker-dealers,” Bitwise said. “However, because indications of interest are not binding agreements or commitments to purchase, these potential purchasers could determine to purchase more, fewer or no Shares.”
Founded in 1955, New York-based VanEck is a global investment and asset management firm focusing on ETFs, mutual funds, and managing accounts for institutional investors. According to VanEck, the company began developing ETF products in 2006.
In 2017, VanEck launched a Bitcoin Futures ETF but, like others, has yet to see a spot in the Bitcoin ETF approved by the U.S. Securities and Exchange Commission. Something the firm and the cryptocurrency market hope changes this week.
Bitwise and VanEck’s applications are just two of several being reviewed by the SEC this week. In December, Bitwise released a Bitcoin ETF ad featuring “The Most Interesting Man in the World” Jonathan Goldsmith.
While the cryptocurrency space sees ETFs as Bitcoin and potential Ethereum’s chance at a moon shot, in their respective filings, Bitwise and VanEck cautioned investors about the potential risk of investing in Bitcoin ETFs.
VanEck, in its filing, cautioned that the investment could go to zero.
“The value of Bbitcoin and, therefore, the value of the Trust’s Shares could decline rapidly, including to zero. You could lose your entire investment,” VanEck said. “The Shares are neither insured nor guaranteed by the Federal Deposit Insurance Corporation, or any other governmental agency or other person or entity.”
“The further development and acceptance of the Bitcoin network and other digital asset networks, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate,” Bitwise wrote. “The slowing or stopping of the development or acceptance of the Bitcoin network may adversely affect an investment in the Shares.”
In a Monday post on Twitter, SEC chair Gary Gensler warned investors about the potential risk of investing in cryptocurrency.
“Investments in crypto assets also can be exceptionally risky & are often volatile,” Gensler said. “A number of major platforms and crypto assets have become insolvent and/or lost value. Investments in crypto assets continue to be subject to significant risk.”
Edited by Ryan Ozawa.