Bitwise Liquidates Six Crypto Option-Income ETFs After Capital-Return Payouts

Friday, July 31, marked the final trading day for six Bitwise option-income exchange-traded funds. Shareholders who still hold shares as of August 3 will be subject to automatic cash redemption at net asset value (NAV) rather than executing a sale on the exchange.

The Bitwise Funds Trust board voted on June 30 to liquidate six funds — ICOI, IMRA, IMST, IGME, ICRC, and IETH — according to a Securities and Exchange Commission prospectus supplement. These products employed option-income strategies linked to Coinbase, Marathon Digital, Strategy (formerly MicroStrategy), GameStop, Circle, and Ethereum. Bitwise Asset Management, a crypto-focused firm that also operates spot Bitcoin and Ethereum ETFs, launched these funds as part of a broader expansion into yield-oriented crypto-themed wrappers.

Option-income ETFs typically generate monthly cash flow by selling call options on their underlying holdings, collecting premium income rather than dividends or interest. That mechanism is central to interpreting the gap between the funds' headline distribution rates and their 0% 30-day SEC yields: option premiums do not factor into the SEC yield calculation, which captures only dividend and interest income net of expenses.

The funds ceased accepting creation and redemption orders after the July 31 market close. Under Bitwise's revised liquidation timetable, the final NAV calculation is scheduled for August 7, with proceeds expected to reach investors through brokers or other financial intermediaries on or around August 10.

Once trading halts, shareholders do not select an execution price. Any shares still held as of August 3 will be redeemed in cash at the fund's NAV. According to the SEC filing, shareholders will generally recognize a capital gain or loss, and each fund may or may not issue one or more distributions before or alongside the redemption payment.

Composition of the April Distributions

Bitwise reported annualized distribution rates alongside standardized yield metrics. In its April 23 payout estimate, Bitwise Asset Management placed distribution rates between 11.15% for IETH and 25.93% for IMST, while every fund's 30-day SEC yield stood at 0%.

These metrics measure fundamentally different things. Bitwise calculates the distribution rate by annualizing the most recent monthly payment and dividing it by a recent NAV figure; the firm explicitly states that this number does not represent total return. The 30-day SEC yield, by contrast, measures annualized dividends and interest earned after expenses. Return of capital represents Bitwise's estimate of the portion of a distribution that consists of an investor's original principal rather than investment income.

Bitwise noted that distributions can reduce a fund's NAV and trading price, while clarifying that the return-of-capital classification does not indicate that any payout was fictitious.

In the April estimate, Bitwise projected that payouts for ICOI, IMRA, IMST, ICRC, and IETH would be 100% return of capital, while IGME was estimated at 0%. These were dated estimates rather than final tax characterizations.

The composition shifted in Bitwise's May estimate, which placed IMST at 23.01% return of capital and ICRC at 0%, while the remaining four funds were estimated at 100%.

By the June 25 distribution notice, Bitwise estimated all six payouts as 100% return of capital, again with a 0% SEC yield across every fund. Annualized distribution rates had narrowed to a range of 7.44% to 22.36%. The same notice reported since-inception returns spanning from -14.45% for IGME to -58.34% for IETH.

Official fund pages dated July 26 through July 29 showed approximately $23.1 million in combined pre-liquidation assets under management — an average of under $4 million per fund. The latest displayed NAVs ranged from $7.22 for IMST to $22.82 for IGME. Month-end figures as of June 29 placed cumulative NAV returns since inception between -12.47% for IGME and -66.11% for IMST.

What Remaining Holders Can Expect

These figures represent snapshots from different dates, leaving July 31 closing assets, final liquidation values, and complete lifetime returns undetermined. The available disclosures do not specify the board's rationale for closing the funds. ETF liquidations are a standard process in the asset management industry, where sponsors routinely shutter products that fail to attract or retain sufficient assets to justify ongoing operating costs.

The amount that remaining shareholders receive will depend on the final NAV scheduled for August 7, with cash distributions expected on or around August 10.