The Difference in Sigma Rules in Bitwise's Avalanche ETF Move

While the spot ETF race in the crypto industry is heating up, Bitwise’s new Avalanche fund proposal is set to make a industry first thanks to sigma rules. This move opens up a way for traditional investors to earn returns from crypto assets while also providing an efficient and low-cost solution.

Return Generation Barrier Removed Thanks to Sigma Rules

The Internal Revenue Service (IRS) recently published guiding principles that allow crypto ETFs to generate returns without creating tax issues. This is where sigma rules come into play — these rules provide a legal basis for ETF managers to stake blockchain assets to generate yields. In the updated filing prepared by Bitwise, it is stated that up to 70% of AVAX assets will be staked on Avalanche’s proof-of-stake network.

This structure introduces a dimension that has not been considered in previous ETF products. VanEck and Grayscale’s Avalanche ETF proposals have not yet adopted staking mechanisms, and therefore do not include yield components.

Standing Out in Competition with the Lowest Sponsor Fee

The fund, trading under the BAVA ticker symbol, offers one of the most competitive sponsor fees in the industry at 0.34%. In comparison, VanEck remains at 0.40% and Grayscale at 0.50%.

The financial structure is strategically designed. Bitwise plans to deduct 12% of the yield obtained through staking as expenses and pass the remaining to fund shareholders. This way, traditional investors can both gain exposure to Avalanche and benefit from staking income.

BAVA’s Opportunity Window for Quality Investors

For the first $500 million in assets, Bitwise is offering a full fee waiver for the first month. This incentive makes BAVA the lowest-cost entry point for investors looking to enter Avalanche.

The updated Bitwise application also includes stricter custody rules with Coinbase, a liquidity reserve mechanism, and updated risk disclosures against quantum-computing threats. If approved, BAVA will be listed on NYSE Arca, while competitors will be listed on NASDAQ, with all products aiming to launch in the first quarter of 2026.

Avalanche (AVAX) Market Data

In this context, looking at AVAX’s current position, the Avalanche network continues to offer staking opportunities thanks to its PoS mechanism. Current price levels, combined with the yield option enabled by sigma rules, position it to attract institutional investors.

Ultimately, Bitwise’s move, as the first developed within the sigma rules framework, offers a new model to the crypto industry — a combination of low fees, built-in yield mechanisms, and tax efficiency.