United States securities and exchange commission logo
November 12, 2021
Hunter Horsley
President
Bitwise 10 Crypto Index Fund
300 Brannan Street, Suite 201
San Francisco, CA 94107
Re: Bitwise 10 Crypto
Index Fund
Amendment No. 2 to
Registration
Statement on Form 10
August 13, 2021
File No. 000-56270
Dear Mr. Horsley:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your response and any amendment you may file in
response to these
comments, we may have additional comments.
Amendment No. 2 to Registration Statement on Form 10
Glossary, page iv
1. We note your response
and revisions made to your filing as a result of comment 7.
Specifically, you have
revised your filing to define Portfolio Crypto Assets per share to
mean NAV per share.
However, based upon disclosure on page 84, NAV is calculated by
summing the assets and
liabilities whereas Portfolio Crypto Assets represent a portfolio of
cryptocurrencies as
disclosed on page 1. Since it appears that NAV and Portfolio Crypto
Assets and each of the
corresponding per share measures are calculated differently, please
revise your filing
accordingly. To the extent you continue to present Portfolio Crypto
Assets per share,
please revise your filing to clearly label this measure as non-GAAP and
include all of the
disclosures required by Regulation G and Item 10(e) of Regulation S-X.
Hunter Horsley
FirstName
Bitwise 10 LastNameHunter
Crypto Index FundHorsley
Comapany 12,
November NameBitwise
2021 10 Crypto Index Fund
November
Page 2 12, 2021 Page 2
FirstName LastName
Business
Activities of the Trust, page 5
2. Refer to your response to comment 5. Please clarify what you mean by
"liquidity
provisions" on page 6, and clarify whether your reference to
participation in decentralized
finance protocols including governance, voting, staking assets,
lending assets and liquidity
provisions applies to a direct or indirect investment.
Calculation of Valuation, page 6
3. We note your revised disclosures and response to comment 7 regarding
your calculation
of the NAV per share, the NAV of the Trust, and the fair valuations
for each Portfolio
Crypto Asset, which were based on the use of the Bitwise Crypto Asset
Price. We also
note disclosure on pages 10-12 of how you determine the Bitwise Crypto
Asset Price,
which does not result in the identification of a principal market to
determine fair value
pursuant to ASC 820-10-35-5 through 35-6C but rather a blended
average used to
determine fair value. Therefore, despite your conclusion that use of
the principal market
determination of fair value in accordance with ASC 820 compared to
your use of a
Bitwise Crypto Asset Price was not materially different for any period
presented, we
believe all measures based upon the Bitwise Crypto Asset Price should
be labeled as a
non-GAAP measure. Please revise all references in your filing
accordingly.
Investment Strategy, page 8
4. Refer to your response to comment 8. We note your disclosure on page 8
that you do not
consider taking advantage of incidental opportunities to generate
additional returns in
excess of the Index that arise from the Portfolio Crypt Assets held by
the Trust to be
inconsistent with your disclosure that the Trust is managed as a
passive investment
vehicle. Please tell us why you believe that such activities,
specifically decisions related
to engaging in staking the Trust's digital assets, are consistent with
your disclosure that the
Trust is managed as a passive investment vehicle.
Index, page 9
5. Refer to your responses to comments 9 and 26. Please tell us why you
believe that you
will have satisfied your Exchange Act reporting obligations in
connection with notifying
investors of material changes in the Index Methodology by disclosing
only those changes
that result in 10% or more changes to the composition of the Index
that also result in a
corresponding change to the Trust. For example, we note your
disclosure on page 62 that
"[t]he Index could be calculated now or in the future in a way that
adversely affects an
investment in the Trust." In addition, we note your disclosure on page
1 that halting Share
subscriptions could cause the Shares to trade at a substantial premium
over or a substantial
discount to the value of the Trust's Portfolio Crypto Assets per
Share. Please tell us why
you believe that you will have satisfied your Exchange Act reporting
obligations by
announcing a decision to halt subscriptions on your website.
Hunter Horsley
FirstName
Bitwise 10 LastNameHunter
Crypto Index FundHorsley
Comapany 12,
November NameBitwise
2021 10 Crypto Index Fund
November
Page 3 12, 2021 Page 3
FirstName LastName
Composite Price Determination, page 10
6. Refer to your response to comment 11. Please revise your disclosure in
Section 3.a.iv on
page 11 to clarify how you convert the crypto-to-crypto price into a
U.S. dollar equivalent
for a trading pair that is not denominated in Quote Crypto Assets.
Eligibility of Cryptocurrencies, page 12
7. Refer to your response to comment 12. We note your risk factor that
"[a] determination
that any of the Portfolio Crypto Assets are a 'security' may adversely
affect the value of
the Portfolio Crypto Assets and the value of the Shares, and result in
potentially
extraordinary, nonrecurring expenses to, or termination of, the
Trust." Please disclose
whether or not the Sponsor or Committee screens digital assets for
undue risk of being
deemed a security and, if so, disclose your policies regarding a
digital asset holding that is
determined to be at risk of being deemed a security. In this regard,
please also explain
your revised disclosure that the Committee screens digital assets to
determine whether or
not a digital asset faces undue risk of "being in violation of U.S.
federal securities laws."
8. We note that Polygon, currently the 21st largest digital asset by
market capitalization
according to CoinMarketCap.com, appears to be the digital asset with
the smallest market
capitalization held by the Trust. We also note that you currently
identify the coins in the
top 10 by market capitalization that are not held by the Trust. Please
include a table
identifying all of the digital assets with larger market
capitalizations than Polygon along
with a brief explanation for the reason they are not included in the
Index.
Departures from the Index, page 16
9. Refer to your response to comment 15. Please disclose when and how you
will
communicate to investors if your staking activities prevent you from
being able to
rebalance the Trust in accordance with the rebalancing of the Index.
Risks Related to Potential Conflicts of Interest, page 69
10. Refer to your response to comment 21. Please add a separate risk
factor that specifically
addresses the relationships between the Sponsor and the Index Provider
and the associated
risk of conflicts of interests related to using an Index Provider that
is affiliated with the
Sponsor as well as the potential conflicts related to the composition
of the Bitwise Crypto
Index Committee.
Financial Information
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Net Realized Loss from Digital Assets, page 85
11. We note the revisions made to your filing as a result of your response
to comment 23
related to the reason(s) for the realized losses related to
fluctuations in the value of the
Trust s Portfolio of Crypto Assets for the three months ended March
31, 2021 and 2020.
Hunter Horsley
Bitwise 10 Crypto Index Fund
November 12, 2021
Page 4
Please also revise your MD&A on page 87 to provide similar disclosures
for your fiscal
years ended December 31, 2020 and 2019.
Management Fee, page 87
12. Refer to your response to comment 25. Please clarify what you mean by
workout
expenses on page 88.
The Custodian and the Custodial Services Agreement
Description of the Trust Company Custodial Services Agreement, page 114
13. Refer to your response to comment 31. Please revise to describe the
types of losses that
are covered by the commercial crimes insurance program held by
Coinbase Global, Inc.
Report of the Independent Registered Accounting Firm, page F-19
14. We note the revisions to Note 3 Fair Value Measurements, beginning on
page F-30 of
your audited financial statements as a result of comment 34. Please
tell us how your
Independent Registered Accounting Firm considered AS 3110 in
determining whether to
dual date their audit report, or revise your filing accordingly.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact William Schroeder at 202-551-3294 or John Spitz at
202-551-3484 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Sonia Bednarowski at 202-551-3666 or Justin Dobbie at 202-551-3469 with
any other
questions.
FirstName LastNameHunter Horsley Sincerely,
Comapany NameBitwise 10 Crypto Index Fund
Division of
Corporation Finance
November 12, 2021 Page 4 Office of Finance
FirstName LastName