Key takeaways:
- On Monday, August 17, trading in Hashdex Bitcoin ETF shares on NYSE Arca ended. This is the first liquidation of the US bitcoin spot fund since it launched in January 2024.
- The fund had $14.7 million in assets at the end of July. Anyone who has not sold by Monday will receive a transfer around August 28, calculated at the value of the assets on the liquidation date.
- Hashdex, in its own announcement, warns that bitcoin price movements during the sell-off may be significant. The risk of this window remains with the shareholder.
- The entire category is worth approximately $77.5 billion and is doing well. The market didn’t die, just the product that didn’t make money.
Since January 2024, spot Bitcoin ETFs have been sold as evidence that the market has finally matured. Big names on the prospectus, a real trading floor under SEC supervision. On Monday, one of them simply ceased to exist.
Hashdex Asset Management has closed the Hashdex Bitcoin ETF, listed on NYSE Arca under the ticker DEFI. The last day of trading was August 17. After this session, the fund stopped accepting creation orders from authorized participants, and the shares were withdrawn from trading. This is the first time a US bitcoin spot fund has gone off the floor.
What does someone who didn’t manage to sell get?
This is where it gets nasty specifically. Those who held shares at the close of Monday’s session will receive a cash payment around August 28. Its amount is the value of net assets on the liquidation date, less the fund’s closing costs and transaction costs.
However, there is a gap between one and the other for over a week, during which the fund sells bitcoin. Hashdex wrote about it directly: price movements during this period may be significant. So someone else chooses the moment of sale for you, and you will find out the price after the fact.
A product packaged like a regular action effectively hides one more thing. Compulsory liquidation closes the position regardless of whether you intended to close it this tax year. The profit or loss is realized and the settlement goes to your annual return on a date you did not choose.
Can my Bitcoin ETF also be closed?
Maybe. There is nothing extraordinary about the mechanism, because an ETF is not a public institution or a depository, but a commercial product. It lives as long as the management fee covers the audit, trustee, legal services and the cost of maintaining the listing. With several million dollars in assets, this math simply doesn’t work out, regardless of what the fund invests in.
Honestly: a Polish retail investor will not buy an American ETF anyway, because he lacks a European document with key information. This liquidation directly affects a handful of people in Poland. However, the economics of European-listed cryptocurrency products are exactly the same, and many of them have assets of the same order as DeFi. It is worth checking the fund card to see how much your fund has actually collected.
Eight out of ten dollars goes to one fund
The bigger picture is not one of brokenness. The entire category of U.S. bitcoin spot funds holds approximately $77.5 billion, or roughly six percent of bitcoin’s capitalization. The money is there, it just flows more and more to one place.
In such a situation, a small fund has no way to grow. It doesn’t lose to bitcoin, it loses to its competitor’s distribution.
What does this mean for you
ETF gives you the convenience and peace of mind of storing your keys. However, it does not guarantee that it will last until your investment horizon. With your own wallet, you make the decision on when to sell, even if it is the worst possible decision.
Hashdex wrote it down in a document for shareholders in one sentence that cannot be read any other way: price movements during a sell-off period can be significant. This is the last information received by people who held USD 14.7 million in this fund until Monday.
