Osprey Bitcoin Trust Funds has announced its plan to convert into an exchange-traded fund (ETF), a bold move following the collapse of acquisition talks with Bitwise Asset Management.
The announcement comes as the U.S. Bitcoin ETF market continues to expand, showcasing fierce competition and innovation among investment management firms. Osprey Bitcoin Trust decision, revealed in a statement on January 14, 2025, marks a pivotal shift for the trust, which has been operational since February 2021.
Osprey Bitcoin Trust: A Strategic Pivot
Launched to provide institutional and retail investors exposure to Bitcoin without the complexity of managing wallets or keys, the Osprey Bitcoin Trust has offered a low-cost alternative, with a management fee of 0.49%. As of January 7, 2025, OBTC managed $186.7 million in assets, with each share representing approximately 0.000326 Bitcoin.
However, OBTC’s trading at a discount to its underlying Bitcoin assets raised concerns among shareholders. The trust began exploring strategic options, which included the recently failed deal with Bitwise.
The conversion to an ETF is a natural progression for Osprey Funds as we seek to provide greater liquidity and transparency for our investors,vsaid Greg King, CEO of Osprey Funds. We believe this step aligns with our commitment to delivering best-in-class Bitcoin investment solutions.
In August 2024, Osprey Bitcoin Trust announced a proposed asset purchase agreement with Bitwise, which aimed to transfer OBTC’s assets into Bitwise Bitcoin shares. This would have provided unitholders with exposure to Bitcoin under Bitwise’s management.
Despite the promising vision, the regulatory deadline of December 31, 2024, passed without approval. Consequently, the deal was terminated, leaving Osprey Funds to pursue alternative strategies.
Osprey’s decision reflects a proactive approach to market challenges,” said Martha Bennett, an industry analyst. While the Bitwise deal was a strategic opportunity, the focus on converting OBTC into an ETF demonstrates resilience and adaptability.
If approved, Osprey Funds will become part of a growing ecosystem of Bitcoin ETFs in the U.S. The market currently features 32 Bitcoin ETFs, including 11 spot Bitcoin ETFs managing a collective $109 billion in assets as of January 15, 2025.
The competition in the Bitcoin ETF space is heating up, and it’s exciting to see firms like Osprey stepping up, remarked Eric Balchunas, a senior ETF analyst at Bloomberg.
Franklin Templeton and Hashdex are among the notable players offering Bitcoin and Ether index ETFs, catering to investors seeking diversified exposure. Meanwhile, Bitwise has introduced a new ETF targeting publicly traded companies holding significant Bitcoin reserves, further diversifying market offerings.
The Bitcoin ETF landscape has transformed dramatically since the first approval a year ago. Spot Bitcoin ETFs, in particular, have garnered significant investor interest due to their direct exposure to Bitcoin prices, unlike futures-based ETFs.
For Osprey Bitcoin Trust, the move to convert OBTC into an ETF underscores a shift in investor demand toward products offering liquidity, transparency, and efficiency. ETFs, with their real-time trading and lower expense ratios, present a compelling case for investors.
This evolution is not just about competition but also about meeting investor preferences, said Cathy Wood, CEO of ARK Invest. ETFs provide a bridge for traditional investors to enter the digital asset space seamlessly.
Challenges Ahead for Osprey Bitcoin Trust
Despite its ambitious plans, Osprey Funds faces significant hurdles. The ETF conversion process requires approval from the U.S. Securities and Exchange Commission (SEC), which has historically been cautious in greenlighting Bitcoin-related products.
Regulatory scrutiny remains a key challenge, noted Jake Chervinsky, a crypto lawyer. Osprey’s success will depend on its ability to address the SEC’s concerns regarding market manipulation and investor protection.
Additionally, Osprey will need to differentiate its ETF from the existing products in the market. With heavyweights like Grayscale and BlackRock dominating the space, carving out a niche will be no small feat.
As Osprey Bitcoin Trust gears up to file Form S-1 with the SEC, the company is poised for a transformative year. The success of its Bitcoin ETF could redefine its market positioning and offer a competitive edge in an increasingly crowded field.
For us, this is more than a conversion—it’s a commitment to our investors and the future of digital asset investing, Greg King emphasized.
With a growing appetite for Bitcoin ETFs among institutional and retail investors, Osprey Funds’ bold move could mark a turning point in its journey and set the stage for further innovations in the crypto investment landscape. Get more from The Bit Gazette
