There are reports that the U.S. Securities and Exchange Commission rejected at least one of the recent Bitcoin exchange-traded funds applications. This indicates that the regulator isn’t ready to accept more exotic futures products.
The SEC seems to have rejected both Direxion’s application for an inverse bear fund and Valkyrie’s request for a leveraged Bitcoin futures ETF.
Eric Balchunas, Bloomberg’s senior ETF analyst, referred to an alert from Dow Jones indicating that the SEC had canceled the Valkyrie leveraged funds. He said that the same move could also apply to the inverse funds application.
It seems that the SEC doesn’t have it with the levered (and probably inverse) Bitcoin futures ETFs. It wouldn’t hurt to give it a try. They could have traded through potentially billion-dollar trading vehicles within a matter of years. via Dow Jones pic.twitter.com/MspMRf3hL9
— Eric Balchunas (@EricBalchunas) October 27, 2021
ETF issuer Direxion applied for a Bitcoin Strategy Bear ETF. This would allow speculators the ability to purchase futures that are short the price Bitcoin. Valkyrie also filed for leveraged BTC futures ETFs that would have provided 1.25x exposure.
Direxion was a product that only invested in futures. However, the Valkyrie one would have had futures and swaps as well as options. Another Dow Jones alert stated that the SEC is only interested in futures products, which are funds that purchase contracts from Chicago Mercantile Exchange.
The regulator doesn’t seem to be keen on approving any product that invests in the asset or anything else than CME futures contract at this stage. Balchunas confirmed:
“Would be fascinating (and possible) if they allowed the Inverse one to go through. This one was only for futures. Valkyrie’s was a little different from that language.
Related: Crypto cracks Wall Street’s ETF Barrier: A Watershed Moment or a Stopgap?
Nate Geraci (ETF Store President) reported that two additional ETFs were applied for by AXS Investments on October 27th. The SEC filings pertain to a regular Bitcoin Strategy ETF, similar to those already approved, as well as another shorting or inverted fund.
A Dow Jones report also states that Grayscale is positive that the SEC will approve a spot Bitcoin ETF before July 2022.
Grayscale filed a request with the SEC on Oct. 19 to convert its Bitcoin Trust (GBTC), into a spot fund that is backed directly by the asset, and not futures contracts.
Geraci commented on the lack of regulation in spot crypto markets. “So crypto exchanges/markets will be regulated then?” Seems ambitious.”
VanEck is finishing preparations for its Bitcoin Strategy ETF launch. It will trade under ticker XBTF. Balchunas stated Wednesday that there was a good chance it would trade on Friday, Oct. 29, but could also trade on Thursday.
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