Leveraged Bitcoin Futures ETF Set to Launch Tuesday

Author: BEN STRACK, blockworks Compiler: Jinse Finance, Shan Ouba

Volatility Shares to Launch First Product Offering Leveraged Exposure to CME-Traded Futures Following Latest Wave of Spot Bitcoin ETF Applications

The first ETF offering leveraged long-term exposure to bitcoin futures contracts in the U.S. will launch this week. Volatility Shares plans to debut its 2x Bitcoin Strategy ETF (BITX) this Tuesday, a spokesperson told Blockworks. The fund seeks to track the excess return of the S&P CME Bitcoin Futures Daily Roll Index by more than two times in one day. In an email to Blockworks, a company spokesperson said: “Cryptocurrency traders in the U.S. will now have convenient and liquid leveraged Bitcoin exposure through traditional brokerage accounts without the need to use cryptocurrencies amidst legal uncertainty.” exchange account."

Approval Tour

The U.S. Securities and Exchange Commission (SEC) will allow the listing of bitcoin futures ETFs in October 2021. The first ETF to be launched by issuer ProShares quickly grew to $1 billion in assets. Its assets under management remain around that level.

Although the SEC approved such products for bitcoin futures contracts traded on the Chicago Mercantile Exchange (CME), the agency appeared to question leveraged products at the time. Valkyrie, which launched its own bitcoin futures ETF in October 2021, detailed plans for a leveraged BTC futures ETF a few days later — designed to provide 1.25 times the value of bitcoin by holding futures, swaps, options and forwards. Currency reference rate exposure. The company withdrew its application a few days later. A person familiar with the matter told Blockworks at the time that the SEC had asked Valkyrie to withdraw the filing. It’s unclear what happened since then, including the SEC’s apparent U-turn on the matter. Volatility Shares declined to comment on specific interactions with the SEC.

“We do not comment on individual investment products,” an SEC representative told Blockworks in an email. Dave Nadig, a financial futurist at data firm VettaFi, told Blockworks last month that he “doesn’t believe” that a leveraged bitcoin futures ETF will eventually launch. “If they do, I suspect they will be short-lived and only used in the narrowest retail use cases,” he said at the time.

US Securities and Exchange Commission (SEC) “letting go” of Bitcoin?

The launch of Volatility Shares follows applications from various fund issuers and exchanges over the past few weeks, and marks the latest wave of bids for ETFs that hold bitcoin directly.

The U.S. Securities and Exchange Commission (SEC) still doesn’t allow so-called spot bitcoin ETFs to go public, despite fund issuers trying for nearly a decade.

But Bloomberg Intelligence analysts James Seyffart and Eric Balchunas tweeted last week that the SEC’s willingness to allow leveraged bitcoin futures ETFs could herald a general “lightening” of bitcoin products.

But James Butterfill, director of research at CoinShares, told Blockworks that the CME’s oversight of bitcoin futures contracts was a “key reason” for the approval of the Volatility Shares proposal.

He added that the SEC’s main hesitation in approving a spot bitcoin ETF has to do with whether spot exchanges are properly regulated.

“If BlackRock can meet the regulatory requirements for adequate regulation of spot exchanges, then the spot ETF will likely be approved,” Butterfill said. “In any case, I expect the approval process to take some time.”