SecProbe.io

CORRESP
1
filename1.htm

    Richard
    Coyle
    Chapman
    and Cutler LLP

    Partner
    320 South Canal Street,
    27th Floor

    Chicago, Illinois
    60606

    T (312) 845-3724

    rcoyle@chapman.com

December
29, 2023

Via
EDGAR Correspondence

United
States Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N.E.

Washington, D.C. 20549

    Re:
    Bitwise Bitcoin ETF

    File No. 333-2260235

Dear
Ms. Bednarowski, Ms. Berkheimer and Mr. Dobbie:

This
letter responds to your comments regarding the Amendment No. 2 to Registration Statement on Form S-1 for the Bitwise Bitcoin ETF
(the “Trust”) with the Staff of the Securities and Exchange Commission (the “Staff”) on
December 4, 2023 (the “Registration Statement”). Capitalized terms used herein, but not otherwise defined,
have the meanings ascribed to them in the Registration Statement.

Comment
1 – Cover Page

Refer
to your response to comment 4. Please revise your cover page to identify the initial Authorized Participant, state that the initial
Authorized Participant is an underwriter, disclose the initial price per Share, disclose that you are offering an indeterminate
number of Shares, and disclose the termination date of the offering, if any.

Response
to Comment 1

Pursuant
to the Staff’s comment, the cover of the Registration Statement has been revised to include the following disclosure (emphasis
added):

Bitwise Investment Manager, LLC, and affiliate of the Sponsor, is expected to purchase the initial Basket(s) of Shares at a per-Share price of $50 (the “Seed
Basket(s)”). Bitwise Investment Manager, LLC will act as a statutory underwriter in connection with the initial purchase of the
Seed Basket(s).

Charlotte
Chicago    New York    Salt Lake City    San Francisco    Washington, DC

December
29, 2023

Page
2

…

The
Trust intends to issue Shares on a continuous basis and is registering an indeterminate number of Shares. The offering is intended
to be a continuous offering and is not expected to terminate until three years from the date of the original offering, unless
extended as permitted by applicable rules under the 1933 Act.

Comment
2 – Prospectus Summary; Overview of the Trust

Please
revise to disclose in your Prospectus Summary, if true, that:

 ● The
                                         Trust, the Sponsor and the service providers will not loan or pledge the Trust’s
                                         assets, nor will the Trust’s assets serve as collateral for any loan or similar
                                         arrangement; and

 ● The
                                         Trust will not utilize leverage or any similar arrangements in seeking to meet its investment
                                         objective.

Response
to Comment 2

Pursuant
to the Staff’s comment, the following disclosure has been added to the Prospectus Summary:

The
Trust will not utilize leverage or any similar arrangements in seeking to meet its investment objective…

Except
for the specific, limited circumstance and time in which the Trust is using the Agent Execution Model, the Trust, the Sponsor
and the service providers will not loan or pledge the Trust’s assets, nor will the Trust’s assets serve as collateral
for any loan or similar arrangement. During the specific, limited circumstance and time when the Trust is using the Agent Execution
Model, the Trust’s bitcoin may be subject to a lien to secure outstanding Trade Credits in favor the Trade Credit Lender,
as is discussed in further detail below.

December
29, 2023

Page
3

Comment
3 – General

Refer
to your response to comment 6. Please revise your disclosure in the Prospectus Summary to state that Shareholders have no voting
rights under the Trust Agreement.

Response
to Comment 3

Pursuant
to the Staff’s comment, the following disclosure has been added to the Prospectus Summary:

Shareholders
have very limited voting rights under the Trust Agreement.

Comment
4 – Custody of the Trust’s Assets

Refer
to your response to comment 8. On page 6, you disclose that “[i]n connection with creations or redemptions, the Trust will,
under most circumstances, process creations and redemptions by selling bitcoin from its Cold Vault Balance.” Please revise
to clarify why the trust will sell bitcoin in connection with creations. In addition, please substantiate or remove your revised
disclosure on page 4 that “[t]he Bitcoin Custodian is subject to extensive regulation.”

Response
to Comment 4

Pursuant
to the Staff’s comment, the disclosure referencing the sale of bitcoin in connection with creations has been deleted, as
well as the disclosure referencing the regulation to which the Bitcoin Custodian is subject.

Comment
5 – The Trust’s Fees and Expenses

Refer
to your response to comment 7. Please disclose whether or not any of the expenses paid by the Sponsor Fee are capped. In addition,
we note your disclosure on pages 4 and 59 that “[t]o pay expenses not assumed by the Sponsor . . ., the Trustee may directly
sell or transfer to an agent of the Shareholders to sell the bitcoin of the Trust as necessary to pay such expenses.” Please
revise to clarify what you mean by “sell directly” and “transfer to an agent of the Shareholders to sell.”

Response
to Comment 5

Pursuant
to the Staff’s comment, the Registration Statement has been revised to include the following disclosure:

December
29, 2023

Page
4

In
exchange for the Sponsor Fee, the Sponsor has agreed to assume and pay the normal operating expenses of the Trust, which include
the Trustee’s monthly fee and out-of-pocket expenses, the fees of the Trust’s regular service providers (Cash Custodian,
Bitcoin Custodian, Prime Execution Agent, Marketing Agent, Transfer Agent and Administrator), Exchange listing fees, tax reporting
fees, SEC registration fees, printing and mailing costs, audit fees and up to $500,000 per annum in ordinary legal fees and expenses.

Additionally,
the disclosure referenced by the Staff in its comment has been revised throughout the Registration Statement as set forth below:

The
Administrator and/or the Sponsor will direct the Bitcoin Custodian to transfer bitcoin from the Trust Bitcoin Account to the Sponsor
Bitcoin Account to pay the Sponsor Fee and any other Trust expenses not assumed by the Sponsor. To pay for expenses not assumed
by the Sponsor that are denominated in U.S. dollars, the Sponsor, on behalf of the Trust, may sell the Trust’s bitcoin as
necessary to pay such expenses. The Sponsor, on behalf of the Trust, will typically seek to buy and sell bitcoin at a price as
close to the BRRNY as practical.

Comment
6 – Risk Factors

Please
add a risk factor that addresses the risks related to your Bitcoin Custodian acting in the same capacity for several competing
products to the extent material.

Response
to Comment 6

The
Sponsor, on behalf of the Trust, thoughtfully considered the Staff’s comment and respectfully declines to add the suggested
risk factor. The Sponsor determined that the material risk of the Bitcoin Custodian acting in the same capacity for several competing
products relates to the fact that the insurance maintained by the Bitcoin Custodian covers losses of the digital assets it custodies
for all of its clients, including the Trust and other exchange-traded products, and that the proceeds from that policy would likely
be shared, reducing the amount of such proceeds available to the Trust. However, specific reference to this possibility is already
discussed throughout the Registration Statement, including in the Prospectus Summary, in the risk entitled Shareholders’
limited rights of legal recourse against the Trust, Trustee, Sponsor, Administrator, Transfer Agent, Cash Custodian, Prime Execution
Agent and Bitcoin Custodian and the Trust’s lack of direct insurance protection expose the Trust and its Shareholders to
the risk of loss of the Trust’s bitcoin for which no person is liable, and in the section of the Registration Statement
entitled “Custody of the Trust’s Assets.” Futhermore, there are numerous other general references to the possibility
that the Bitcoin Custodian’s insurance is unlikely to fully compensate the Trust in the event of loss. Accordingly, the
Sponsor, on behalf of the Trust, has determined that additional references would be duplicative in nature.

December
29, 2023

Page
5

Comment
7 – Risk Associated with Investing in the Trust; The development and commercialization of the Trust is subject to competitive
pressures

Refer
to your response to comment 11. Please expand this risk factor to address the risks associated with the timing of your product
reaching the market and your fee structure relative to other bitcoin ETPs.

Response
to Comment 7

Pursuant
to the Staff’s comment, the referenced disclosure has been revised as set forth below:

If
the SEC were to approve many or all of the currently pending applications for such exchange-traded bitcoin products, many or all
of such products, including the Trust, could fail to acquire substantial assets, initially or at all. The Trust’s competitors
may also charge a substantially lower fee than the Sponsor’s Fee in order to achieve initial market acceptance and scale.
Accordingly, the Sponsor’s competitors may commercialize a competing product more rapidly or effectively than the Sponsor
is able to, which could adversely affect the Sponsor’s competitive position and the likelihood that the Trust will achieve
initial market acceptance, and could have a detrimental effect on the scale and sustainability of the Trust. For exchange-traded
products similar to the Trust, there have been significant “first-mover” advantages in terms of asset gathering, trading
volume and media coverage. In many cases, the first mover in an asset class has been able to maintain these advantages for extended
periods. In the event that the SEC were to approve other exchange-traded bitcoin products prior to approving the Trust, the Trust
could be significantly negatively affected.

Comment
8 – The amount of bitcoin represented by a Share will decline over time

Refer
to your response to comment 10. On page 33, you refer to “Shares that are issued in exchange for additional deposits of
bitcoin” and to the “Authorized Participants’ ability to purchase and sell bitcoin in an efficient manner to
effectuate creation and redemption orders.” Please revise here and throughout to clarify that creations of Shares will be
cash transactions. In this regard, we note your disclosure on page 6 that “[i]t is currently anticipated that all sales
and redemptions of Shares will be done in exchange for U.S. dollars and only in transactions with Authorized Participants.”

December
29, 2023

Page
6

Response
to Comment 8

Pursuant
to the Staff’s comment, the referenced disclosure has been deleted.

Comment
9 – Other Risks; Shareholders’ limited rights of legal recourse against the Trust, Trustee, Sponsor

Refer
to your response to comment 21. We note your disclosure on page 41 that “[t]he Bitcoin Custodian maintains an annual renewed
insurance policy in the amount of $320 million,” that “[t]his insurance policy covers the loss of client assets held
in cold storage at the Bitcoin Custodian,” and that “[t]his insurance program, which has continuously run since 2013,
provides the Bitcoin Custodian and its clients with some of the broadest and deepest insurance coverage in the crypto industry,
with coverage designed to be comprehensive, including losses from employee collusion or fraud, physical loss (including theft),
or damage of key material, security breach or hack, and fraudulent transfer.” However, on page 5, you state that “[t]he
Bitcoin Custodian has insurance coverage as a subsidiary under its parent company, Coinbase Global, Inc., which procures fidelity
(e.g., crime) insurance to protect the organization from risks such as theft of funds.” Please revise to clarify
whether the insurance policy described on page 41 is in addition to the policy held by the parent company, which covers several
subsidiaries and not just the Bitcoin Custodian.

Response
to Comment 9

Pursuant
to the Staff’s comment, the disclosure referenced in the Prospectus Summary has been revised to more closely align with
the disclosure referenced in the section of the Registration Statement entitled “Risk Factors.”

Comment
10 – The Trust and Bitcoin Prices; The CME CF Bitcoin Reference Rate - New York Variant

Refer
to your response to comments 18 and 22. We note your disclosure on pages 29 and 57 that “[i]f the BRRNY is not available,
or if the Sponsor determines, in its sole discretion, that the BRRNY does not reflect an accurate bitcoin price, the Trust’s
holdings may be ‘fair valued’ in accordance with the valuation policies approved by the Sponsor.” Please revise
your disclosure on page 52 to describe the valuation policies approved by the Sponsor.

December
29, 2023

Page
7

Response
to Comment 10

Pursuant
to the Staff’s comment, the referenced disclosure has been revised to include the following disclosure:

Those
valuation policies stipulate that when seeking to fair value bitcoin, the Sponsor may apply all available factors the Sponsor
deems relevant at the time of the determination, and may be based on analytical values determined by the Sponsor using third-party
valuation models. Pursuant thereto, the Sponsor expects to utilize a volume weighted average price or volume weighted median price
of bitcoin provided by a secondary pricing source (“Secondary Source”). If a Secondary Source is not available or
the Sponsor in its sole discretion determines the Secondary Sources are unreliable, the price set by the Trust’s principal
market as of 4:00 p.m. ET, on the valuation date would be considered for utilization. In the event the principal market price
is not available or the Sponsor in its sole discretion determines the principal market valuation is unreliable the Sponsor will
use its best judgment to determine a good faith estimate of fair value based upon all available factors.

Comment
11 – BRRNY Methodology

Refer
to your response to comment 24. Please revise to briefly describe the contingency calculations if, for example, a Relevant Transaction
or Constituent Platform is unavailable or if there is a calculation failure.

Response
to Comment 11

Pursuant
to the Staff’s comment, the following disclosure has been added to the section of the Registration Statement entitled “The
Trust and Bitcoin Prices – The CME CF Bitcoin Reference Rate – New York Variant”:

In
the event that there are errors or irregularities in the calculation and publication of the BRRNY, including delayed, missing
data or erroneous data, the Benchmark Provider will apply the “Contingency Calculation Rules” as it relates to the
BRRNY that are set forth on the Benchmark Provider’s website. Such rules dictate how the Benchmark Provider will calculate
the BRRNY, depending upon the type of error or irregularity. For instance, in the event that no Relevant Transaction occurs on
a Constituent Platform on a given day, or one or more Relevant Transactions do occur on the Constituent Platform but cannot be
retrieved by the Benchmark Provider, the Constituent Platform is disregarded in the calculation of the BRRNY for that day. In
addition, all Relevant Transactions are subject to automated screening for erroneous data. Relevant Transactions that have been
flagged as erroneous pursuant to the automated screening and the Contingency Calculation Rules are disregarded in the calculation
of the BRRNY for a given day. If, for whatever reason, the Benchmark Provider is unable to calculate and publish the BRRNY by
the stipulated dissemination time, it shall publish a notification on its website informing BRRNY users, including the Trust,
the calculation and publication has been delayed.

December
29, 2023

Page
8

Comment
12– BRRNY Methodology

Please
revise to disclose how the Tr