Bitwise is closing six crypto option income ETFs after their headline yields turned out to be funded largely by investors' own capital, according to a CryptoSlate report published August 2, 2026. The six funds, ICOI, IMRA, IMST, IGME, ICRC, and IETH, stopped trading on July 31, 2026, and remaining holders face an automatic cash redemption in early August.
The funds and what they held
The six ETFs were single-stock and single-asset option income products tied to Coinbase (ICOI), Marathon Digital (IMRA), Strategy (IMST), GameStop (IGME), Circle (ICRC), and Ethereum (IETH). Each ran a covered-call style strategy, selling options against exposure to the underlying to generate a stream of monthly distributions. That structure is what let the funds advertise large annualized distribution rates, which an April estimate placed between 11.15% for the Ethereum fund and 25.93% for the Strategy fund.
Combined assets under management sat at roughly $23.1 million across all six between July 26 and 29, a small footprint for a fund family. Bitwise has not publicly stated why the board chose to wind them down. The available disclosures leave that decision unexplained.
The gap between the yield and the payout
The distribution rate and the yield told two different stories. All six funds reported a 30-day SEC yield of 0%, the standardized figure that measures income actually earned from interest and dividends. A fund can post a 0% SEC yield while still cutting large monthly checks, because those checks can be paid out of option premiums, realized gains, or the fund's own principal.
By June 25, Bitwise's own estimates classified all six distributions as 100% return of capital. Return of capital means the money paid to shareholders came from the assets they already owned, not from investment income. It lowers the fund's net asset value and share price with each payout. A high advertised distribution rate sitting on top of a 0% SEC yield and a 100% return-of-capital classification is the clearest sign that the "yield" was, in practice, the fund handing money back to its holders.
Return of capital is not automatically proof that a payout was fictitious, and Bitwise noted that the classification alone does not confirm the distributions were hollow. Even so, the since-inception numbers are hard to read charitably. NAV returns as of June 29 ranged from negative 12.47% on the GameStop fund to negative 66.11% on the Strategy fund. Investors in the worst performer lost roughly two-thirds of their principal while receiving distributions drawn from that same shrinking pot.
The redemption timeline
The wind-down runs on a fixed schedule. The final trading day was July 31, 2026. The final NAV will be struck on August 7, and cash redemption is expected around August 10. Anyone still holding shares as of August 3 gets a forced cash redemption rather than the chance to sell into the market. Holders who want to control their exit and any tax consequences would have needed to act before the last trading day rather than wait for the automatic payout.
The read on packaged crypto yield
The episode is a reminder that a large distribution rate is a marketing number, not a return. The SEC yield, the return-of-capital breakdown, and the NAV trend are the figures that describe what an income fund is actually doing. When a product promises double-digit payouts on volatile single-stock or single-asset exposure, the premium has to come from somewhere, and covered-call income caps the upside while leaving most of the downside intact. In a drawdown, the distributions keep flowing by eating principal.
The same caution applies well beyond ETFs. Crypto rewards products across the market lean on headline percentages that do not survive contact with the fine print. It shows up in staking cards that pair yield with token price risk, where a falling token can erase months of gains, and in staking and yield programs that quote an APY without the conditions attached. It shows up again in cashback rewards advertised at a flat top rate that only applies below a monthly cap or above a spending tier. The Bitwise funds are a clean example of the underlying lesson: read the mechanism that produces the number, not the number on the banner.
Overview
Bitwise is liquidating six crypto option income ETFs (ICOI, IMRA, IMST, IGME, ICRC, IETH) that advertised distribution rates as high as 25.93% while reporting a 0% 30-day SEC yield. As of June, all six payouts were estimated at 100% return of capital, meaning investors were largely paid back their own money as NAV fell. Trading stopped July 31, 2026, and holders as of August 3 face automatic cash redemption around August 10. The case underlines why the SEC yield and return-of-capital classification matter more than a headline payout rate on any crypto income product.
