BITW: Against My Bitcoin‑Maximalist Philosophy

Summary Bitwise 10 Crypto Index Fund ETF catches my attention during the screening of new strong buy ratings. The benchmark of BITW is simple, transparent, and representative. Unfortunately, its structure seems to present itself in a less efficient way. In the long term, neither an effective hedge nor any alpha can be observed compared to holding only Bitcoin in the portfolio. This confirms my maximalist soul: I think BTC is enough to represent the crypto segment in a portfolio, and that the concept of diversification in DeFi is overrated. “In the middle of a bull market , is it better to stay maximalist on BTC, or also gain exposure to altcoins?” It’s with this question that I approach the study of the Bitwise 10 Crypto Index Fund ETF ( OTC:BITW ), an instrument that in theory offers more diversified exposure to the crypto market. Well, it’s a challenging question. And yet it leads to a clear answer. Beyond the fact that I think BITW still has structural issues that are hard to digest, I still don’t see concrete advantages from diversifying into other altcoins. My personal opinion? Even today, BTC maximalism wins. What Kind of Fund is It? BITW is neither an ETF nor a CEF: it is a Delaware Statutory Trust with shares traded on OTCQX. Although the benchmark index, the Bitwise 10 Large Cap Crypto Index, is indeed a sort of S&P 500 of crypto, we certainly cannot say that BITW is destined to become as solid as the SPY ETF. Simply put, the index tries to represent in a single instrument the performance of the 10 largest cryptos by market capitalization (free-float adjusted), following a rules‑based methodology, but the problem is that BITW replicates the index using a structure different from an ETF. For this reason, the representation between NAV and market price is not that accurate. If the NAV is the value of the underlying cryptos divided by the number of shares, and the market price is the price of the shares traded, the relationship between these two figures is not very linear. And I want to highlight this right away: being an OTC‑traded Trust (the shares trade on OTCQX, not the NYSE or Nasdaq) there is no daily creation/redemption mechanism , so it is subject to significant discounts or premiums relative to the NAV. In the past there have been discrepancies that were far too evident: such as premiums above 600% or discounts greater than 30%. Well, let’s just say I know more than one person who wouldn’t sleep at night faced with such swings. The Switch to an ETF Theoretically, the SEC had approved the switch to an ETF. This would have eliminated much of BITW’s structural issues. The problem? It then abruptly put the plan on hold. This calls BITW’s future into question: it’s not at all certain that the transformation will happen. There are no standards for ETFs on crypto like XRP and ADA, so how could BITW or GDLC make this conversion? Therefore, today, BITW has structural limits that an investor cannot ignore. The Selection Strategy It is a market‑weight fund and seeks to maintain an orderly structure, with transparent capping rules: for example, to reduce turnover, an asset is replaced only if another asset surpasses it by 10% for five consecutive days. As for the selection strategy, I must admit, it is actually very simple and transparent (more than other funds analyzed): it selects liquid cryptos (liquidity >1% of the market) it avoids stablecoins or memecoins and any asset under $0.01 for 30 consecutive days they must be custodial by regulated third parties (e.g., Coinbase Custody, Fidelity Digital Assets…) Then there is a committee in place, which can remove an asset or an exchange on the same day in case of extraordinary events (hacks, legal issues, frauds). The same committee can claim hard forks, airdrops, staking rewards (even though these are not considered in the default index calculation). The result is this holding distribution. Bitcoin 74.4% Ethereum 14.1% XRP 5.9% Solana 3.1% Cardano 0.9% SUI 0.4% ChainLink 0.4% Avalanche 0.3% Litecoin 0.3% Polkadot 0.2% What Should Make You Think There is an overexposure to Bitcoin compared to its dominance. And the question I ask myself as an investor is: is it worth getting exposure to such a complex fund just for less than 30% diversification in altcoins? In fact, considering that ETH covers 14%, we are talking about a concrete exposure to coins not accessible through ETFs of only 12%. Let’s look at it with the numbers: BITW – Holding distribution (Author) BITW or a BTC/ETH Portfolio? First of all, BITW has an expense ratio 16 times higher than BTC (2.5% vs 0.15%). So, I would expect BITW to deliver alpha compared to Bitcoin, or at least hedging power. And here’s the first conflicting clue: BITW has a beta of 0.98 to BTC. This already rules out the idea that altcoins (at least that small percentage) manage to hedge Bitcoin. Regarding outperformance, it can be debated: today, on short timeframes (during bull runs) there is alpha. BITW – BTC : Price return (Seeking Alpha) But it’s an alpha that immediately vanishes in bear markets. BITW – GBTC: Price return (Seeking Alpha) For this reason, I see no reason to get exposure to a complicated instrument like BITW. You would achieve the same beta with BTC or a combination of it with ETH. In addition, by using ETFs, you would still have a leaner, more transparent, and less costly portfolio setup. Risk And I understand the STRONG BUY from the quant rating: the crypto market is running, the push from institutional adoption is concrete, no longer just a hypothesis. With the GENIUS Act , but not only that, a new monetary system is truly being considered. This could positively impact Bitcoin, of course, and we’ve seen it clearly here, but also the alts, and beyond ETH , if the other major alts were also to undergo a process of “regulation,” they could truly become the protagonists of an alt season. BITW – Quant rating (Seeking Alpha) Of course, this could bring alpha to BITW, simply because it has that roughly 14% in smaller altcoins than ETFs. But if we think about it, something similar was already seen in 2024 with XRP, precisely because of a regulatory consequence. And it’s an interesting case study: because even here, BITW, which has XRP as its third greatest holding, still wasn’t able to remain competitive compared to a balanced portfolio of just ETH and BTC. Conclusion I’ll be honest, I like the concept of an S&P 500 of crypto, and the index on which BITW is built has nothing wrong with it. However, I think that under the conditions offered by BITW, there is no advantage compared simply to a portfolio made up of BTC and ETH in the form of ETFs.

Source: Seeking Alpha