Bitwise Bitcoin ETF Set to Acquire $120 Million in Bitcoin from Osprey Bitcoin Trust

The Bitwise Bitcoin ETF (BITB) is set to acquire $120 million in Bitcoin through a deal with Osprey Bitcoin Trust (OBTC). This move is part of an Asset Purchase Agreement between Bitwise Asset Management and Osprey Funds.

Bitwise Asset Management and Osprey Funds released a joint statement on August 27, announcing this deal. The agreement marks a strategic transaction in which Bitwise will absorb OBTC's Bitcoin holdings.

OBTC Unitholders to Receive BITB Shares in $120 Million Bitcoin Acquisition Deal

As part of the deal, OBTC unitholders will liquidate their shares and, in return, receive shares of the Bitwise Bitcoin ETF (BITB). This way, OBTC investors can transition their holdings into BITB, a more prominent and widely recognized Bitcoin ETF.

However, the transaction is still subject to certain closing conditions but is expected to be finalized later this year.

Osprey Funds, headquartered in Fairfield, Connecticut, initially launched its OBTC on the OTC market in February 2021. Since then, it has offered U.S. investors access to Bitcoin with a management fee of 0.49%.

Moreover, Bitwise's acquisition will increase the assets under its management and strengthen its position in the competitive market of Bitcoin ETFs.

At the time, the much larger Greyscale Bitcoin Trust (GBTC) competed with Osprey Bitcoin Trust. Both trusts aimed to provide investors with a way to gain exposure to Bitcoin without directly purchasing the cryptocurrency.

However, the market dynamics shifted significantly when Greyscale eventually converted its trust into a spot Bitcoin Exchange-traded fund (ETF). This move offers greater liquidity and transparency for investors.

Osprey Bitcoin Trust's Struggles Lead to Legal Action and Strategic Alternatives

In January 2023, Osprey Bitcoin Trust took legal action against Grayscale, accusing the firm of misleading advertising and promotional practices. Osprey argued that these practices had unfairly allowed Grayscale to capture a monopolistic share of what should be a two-participant market.

The lawsuit highlighted the competitive tensions between the two firms, with Osprey struggling to maintain its market position in the face of Grayscale's aggressive tactics.

By March 2023, Osprey found itself in a challenging situation. The units of its trust were trading at a discount to the underlying value of Bitcoin. This meant that investors could buy shares in the trust for less than the value of the Bitcoin those shares represented.

Therefore, Osprey began to explore options, including selling or liquidating the trust, to address its financial challenges.

In an X post on August 27, Osprey Funds Founder and CEO Greg King explained that they sought a solution that would work for everyone. However, this decision seemed to be the best choice. OBTC's website showed that it had assets under management of approximately $120.7 million.

I appreciate that. We wanted a solution that worked for all and this seems to be the best option.

- Greg King, CFA (@GregKingOsprey) August 27, 2024

For longer-term investors in OBTC, the trust has delivered a three-year return of around 9.5%. This showed it lagged behind Bitcoin's 23.5% return over the same period, as seen on Barchart and Yahoo Finance data.

This recent announcement builds on Osprey's earlier communication about exploring strategic alternatives. Bitwise marks a significant milestone in the process, offering OBTC holders the opportunity to benefit from its scale and enterprise.

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