Asset managers rush to file applications for bitcoin futures ETFs

At least four asset managers have applied for ETFs to invest in Bitcoin futures after Securities and Exchange Commission Chairman Gary Gensler showed that such a fund could be approved earlier this month. But investors may not want them in place of physically backed Bitcoin ETFs, analysts said.

Valkyrie Investments is the latest fund shop to throw its hats into the ring with the Valkyrie Bitcoin Strategy ETF, which focuses on futures that announced plans last week.

ETFs do not invest directly in Bitcoin, but instead buy Bitcoin futures contracts. As the contract expires, the filing says the contract will be replaced by a similar contract with a later expiration date.

Meanwhile, VanEck has announced plans to launch a Bitcoin futures ETF similar to a similar fund filed in 2017. The previous version was not launched.

In addition to investing in Bitcoin futures, the VanEck Bitcoin Strategic ETF will also invest in Canada-listed ETFs that provide exposure to the underlying digital assets, according to Filing.

Neither fund disclosed the cost ratio or start date.

Invesco and ProShares earlier this month Submit to launch Bitcoin tracking ETFs that invest in futures.

However, analysts say such ETFs, even if approved as Gensler has shown, may not meet investors’ desire for Bitcoin ETFs to track real property.

Neena Mishra, ETF Research Director at Zacks Investment Research, says investors are more attracted to ETFs that invest in physically backed Bitcoin. She compared gold-tracking ETFs, such as the $ 57 billion SPDR Gold Trust and the $ 27.6 billion iShares Gold Trust, with ETFs that buy gold futures, including the $ 83 million Invesco DB Gold Fund.

According to FactSet, SPDR Gold Trust raised $ 11.8 billion in the year ended July 31, and iShares Gold Trust raised $ 827 million. According to ETF.com, the former was launched in 2004 and the latter debuted in 2005. Meanwhile, the Invesco DB Gold Fund has raised $ 61.6 million in the year ending July 31st. This fund was born in 2007.

“Investor education is important, but I think investors understand the difference between Bitcoin futures ETFs and ETFs that actually track Bitcoin,” says Mishra. “Many crypto investors who are really looking for Bitcoin ETFs will wait for the latter.”

However, most retail investors looking for Bitcoin exposure may not understand the nuances and complexity of futures-based ETFs, with $ 162 million in customer assets as of March 25. Nathan Gerachi, president of the ETF store, who is the managed registered investment adviser, said. He said retail investors probably didn’t understand the available options that could give Bitcoin exposure, such as the $ 30 billion Grayscale Bitcoin Trust.

“I don’t know how many people have interacted with people who think GBTC is an ETF, which is alarming,” he said. “ETF issuers need to continue to lead education, which ultimately results in investors making sure they understand what they are buying.”

Mishra added that most retail investors didn’t understand the premium they were paying when they bought the Grayscale Bitcoin Trust. The fund charges a 2 percent annual fee.

Bitcoin futures ETFs can be expensive, but unlikely to be more expensive than crypto funds and vehicles already available to investors, said Dave Nadig, chief investment officer and research director of ETF trends. Says. He said Bitcoin futures ETFs could cost an average of 90 basis points, consistent with what Ark 21Shares Bitcoin ETFs, a physically supported fund awaiting approval, would charge. Estimated.

Investors prefer to avoid Bitcoin futures ETFs, as futures markets can risk contango if later expired contracts are more expensive than contracts near the end date, Mishra said. Maybe. In such cases, she explained, ETF performance could suffer and investors could lose money.

Last year’s “super contango” in the oil market was caused by price competition between Saudi Arabia and Russia and exacerbated by a pandemic blockade.It left investors a loss of nursing and led to litigation and regulatory scrutiny Fund sponsor When Trading app..

In addition, Bitcoin futures ETFs (such as VanEck’s products) seeking to invest in Canadian Bitcoin ETFs may change their strategy or suddenly change their strategy if regulators give a green light to a physically backed Bitcoin ETF. Mishra pointed out that it could become a fund of funds. Investor.

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