Osprey Plans Bitcoin ETF Conversion After Bitwise Bid Fails

Osprey Funds announced its intent to seek conversion of its bitcoin trust into an exchange-traded fund, making a strategic pivot after the collapse of its acquisition deal with Bitwise Asset Management .

The planned conversion of the $186.7 million Osprey Bitcoin Trust comes amid growing competition in the bitcoin ETF market, as established players vie for market share following the Securities and Exchange Commission’s approval of spot bitcoin products last year.

The Fairfield, Connecticut-based firm intends to file a Form S-1 registration statement with the SEC by the end of January, according to an announcement from the company Tuesday.

The move follows the termination of Osprey’s asset purchase agreement with Bitwise, which failed to secure necessary regulatory approvals by the Dec. 31 deadline, according to a separate announcement from the firm released on the same day.

The ETF conversion strategy represents a shift from March 2023, when Osprey considered potentially selling or liquidating the trust after units traded at a discount to bitcoin’s value.

Osprey Joins ETF Race

OBTC currently tracks bitcoin’s price using the Coin Metrics CMBI Bitcoin Index as a reference point for performance, and it holds the underlying bitcoin with Fidelity Digital Asset Services serving as the custodian, according to a filing with the SEC. The trust has seen its unit price rise nearly 158% over the past year.

However, the fund’s performance has not been without challenges. Since launching in February 2021 at $50, OBTC now trades at $30.54.

The conversion attempt follows similar moves in the crypto investment space, including the recent conversions of Grayscale’s Bitcoin Trust ETF (GBTC) in January 2024.

While pursuing the ETF conversion, Osprey maintains its ongoing lawsuit against Grayscale, filed in January 2023. The suit alleges that Grayscale’s advertising misled investors about the likelihood of its trust becoming an ETF, allowing it, in turn, to dominate the bitcoin trust market.

Read More: Osprey Claims Grayscale Misled Investors in Latest Suit

The announcement comes as the SEC reviews various crypto fund applications, with its most recent decision Tuesday to extend the review period for the Bitwise 10 Crypto Index Fund to March 5.