Crypto-related ETFs vying for launch this year

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Many crypto ETFs offered in the US fail to launch.

The SEC has for years blocked planned ETFs that would invest directly in bitcoin, and some industry watchers have said they don’t expect the regulator to allow one any time soon.

Although the quest for spot Bitcoin ETFs continues, companies have resorted to offering funds holding the shares of crypto and blockchain-related companies, or Bitcoin futures.

Three crypto-related ETFs, the Valkyrie Bitcoin Miners ETF (WGMI), VanEck Digital Transformation ETF (DAPP) and Bitwise Crypto Industry Innovators ETF (BITQ) have year-to-date returns of over 100% at from Friday, putting them among the top 10 performers for all ETFs, according to data from the ETF Database.

The largest blockchain ETF, Amplifys Transformational Data Sharing ETF (BLOK), has returned around 30% so far in 2023, a performance that ranks 59th.

But these are products that are already on the market. In the absence of spot Bitcoin ETFs, fund groups continue to innovate new strategies.

Leveraged Bitcoin Futures ETF

Several leveraged bitcoin futures funds are currently being considered for launch, though their fate remains unclear.

Volatility Shares plans to launch its 2x Bitcoin Strategy ETF (BITX) on June 13, the company announced in a statement Tuesday. The firm declined to comment further.

Although the first bitcoin futures ETFs were launched in October 2021, BITX appears to be the first US-based ETF to offer long leveraged exposure to the cryptocurrency futures market, according to the company.

The proposed fund targets investment results that are twice the excess return of the S&P CME Bitcoin Futures Daily Roll Index for a single day.

Other issuers have deposited similar funds.

ProShares, which was the first to market a bitcoin futures ETF, filed its Ultra Bitcoin Strategy ETF on April 6 about a week after Volatility Shares filed.

Generally, we don’t comment on regulatory matters, a ProShares spokesperson told Blockworks.

The Direxion group of funds followed suit, filing its Daily Bitcoin Strategy Bull 2X shares on April 11. Valkyrie recently revealed plans on May 15 to launch a Bitcoin Futures Leveraged Strategy ETF.

Valkyrie had filed a fund request in October 2021 that would have provided 1.25x exposure to the bitcoin benchmark rate and held futures, swaps, options and futures. He withdrew the request a few days later. A source familiar with the matter told Blockworks at the time that the SEC had asked Valkyrie to withdraw the filing.

A spokesperson for Valkyrie declined to comment on its Bitcoin Futures Leveraged Strategy ETF filing.

Dave Nadig, a financial futurist at data firm VettaFi, said he expects the SEC to lose its lawsuit against Grayscale Investments. He thinks this could prompt the securities regulator to shut down all US-listed crypto futures products. Some said they expected a decision in the case in the third quarter of this year.

He added that he is not convinced that the proposed leveraged bitcoin futures ETFs will ever make it to launch.

If, in fact, they do, I suspect they will be short-lived and used only in the narrowest retail use cases, Nadig told Blockworks.

Other funds offered

NEOS, a firm specializing in options-based income ETFs, filed earlier this month to launch a Bitcoin High Income ETF and a Bitcoin Quantitative Trend ETF.

The actively managed high-income ETF reportedly employs a bitcoin futures call options strategy, while the other seeks to capture positive bitcoin price momentum while aiming to minimize downside risk through the use of cash and cash alternative products.

The latter ETF would hold bitcoin futures, US government securities and money market funds, as well as short-term fixed income ETFs and alternative cash ETFs.

NEOS proposed that these funds go into effect 60 days after filing in mid-May.

The same week as the NEOS filings, Grayscale filed a Global Bitcoin Composite ETF, a fund that would hold ETPs backed by physical bitcoin, as well as bitcoin mining companies. A separate Grayscale Privacy ETF would invest in companies developing blockchain-based privacy solutions.

The crypto-focused asset manager had also shared plans to launch an ether futures ETF before changing its filing to rule out the proposal. Bitwise, Direxion and Valkyrie withdrew similar funding requests, as sources told Blockworks that the SEC had instructed the companies to do so.

Lara Crigger, managing editor of VettaFis, previously told Blockworks that she does not expect the SEC to clear the Global Bitcoin Composite ETF, noting that the Privacy ETF has a better chance of launching.

Bloomberg Intelligence analyst James Seyffart said in a tweet earlier this month that he believes the SEC should approve the Global Bitcoin Composite ETF after allowing bitcoin futures ETFs due to regulations. federal government of this market.

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