Bitwise to Liquidate Six Crypto Option-Income ETFs

Bitwise is winding down six option-income exchange-traded funds that used option strategies tied to Coinbase, Marathon Digital, GameStop, Circle and Ethereum. The funds are ICOI, IMRA, IMST, IGME, ICRC and IETH. Some of the ETFs reported high annualized distribution-rate estimates in April while all showed a 30-day SEC yield of 0%.

The Bitwise Funds Trust board approved the liquidations on June 30. The funds stopped accepting creation and redemption orders after the close of trading on July 31, which was their final trading day. Shares still held as of Aug. 3 will be automatically redeemed for cash at the funds’ final net asset value. Bitwise scheduled the final NAV calculation for Aug. 7 and expects brokers and other intermediaries to deliver proceeds on or about Aug. 10.

In April, Bitwise published annualized distribution-rate estimates that ranged from about 11.15% for the Ethereum-focused IETH to about 25.93% for IMST. The firm’s distribution rate annualizes the most recent monthly payment relative to recent NAV. The 30-day SEC yield, which measures annualized dividends and interest after expenses, was 0% for all six funds.

Tax-characterization estimates for April distributions showed most payouts were treated as return of capital. In April, five of the six funds were estimated at 100% return of capital and IGME was estimated at 0%. Those estimates were revised in May and June; by the June 25 distribution notice Bitwise estimated all six payouts as 100% return of capital. The firm said the estimates were dated and not final tax determinations. A distribution classified as return of capital is treated as a return of part of an investor’s original investment rather than current taxable income and can reduce a fund’s NAV.

A prospectus supplement filed for the liquidations states that shareholders generally will recognize a capital gain or loss on redemption and that a fund may or may not make one or more distributions before or with the redemption payment. Bitwise corrected its timetable in filings to reflect the Aug. 7 NAV calculation and the expected Aug. 10 payment window, and the filings note that holders remaining after trading stopped are not choosing their execution price.

Pre-liquidation fund pages dated in late July showed combined assets under management of about $23.1 million across the six ETFs. Displayed NAVs around July 26–29 ranged from roughly $7.22 for IMST to $22.82 for IGME. Notices and monthly reports showed negative since-inception NAV returns across the group at various reporting dates, with examples such as about -14% for IGME to roughly -58% for IETH. Filings do not provide a detailed reason for the board’s vote to close the funds, and the exact cash amounts remaining holders will receive will depend on the final NAV and any distributions made with or before the redemption payment.