Global X has launched an actively managed ETF in the US that taps into the digital assets investment theme by combining bitcoin futures with equities of companies poised to benefit from advances in blockchain technology.
Jay Jacobs, Head of Research & Strategy at Global X.
The Global X Blockchain & Bitcoin Strategy ETF (BITS US) has been listed on Nasdaq and has come to market with approximately $10 million in assets.
The fund’s bitcoin futures sleeve consists of standardized, cash-settled bitcoin futures contracts trading on the Chicago Mercantile Exchange (CME).
The CME-listed bitcoin futures market has seen tremendous growth over the past three years with average daily open interest increasing from $77 million in Q1 2018 to approximately $1.5 billion in Q3 2021.
The ETF may invest in futures contracts of any maturity, affording it the flexibility to shift further down the futures curve in order to reduce the rolling costs associated with front-month contracts when the market is in contango.
This flexibility already differentiates the fund from the three recently launched bitcoin futures ETFs – the $1.4 billion ProShares Bitcoin Strategy ETF (BITO US), $60m Valkyrie Bitcoin Strategy ETF (BTF US), and $10m VanEck Bitcoin Strategy ETF (XBTF US) – which target front-month contracts.
The fund’s equities sleeve, meanwhile, consists of developed market firms deriving at least 50% of their revenues or operating income from mining digital assets, conducting blockchain transactions, developing blockchain applications, supplying blockchain hardware, and assisting in blockchain integration. US-listed companies with a significant proportion of balance sheet assets dedicated to digital assets are also eligible for inclusion.
Currently, the fund gains its exposure to blockchain companies by investing in the passively managed $120m Global X Blockchain ETF (BKCH US).
BKCH accounts for half (50.1%) of the ETF’s allocation with the remaining weight distributed approximately equally between bitcoin futures expiring in January (22.1%) and February (25.0%) 2022.
Jay Jacobs, Head of Research & Strategy at Global X, said: “The blockchain and digital asset theme is reaching a critical inflection point as adoption accelerates across millions of people and businesses around the world. We believe investors looking to participate in the full disruptive potential of this powerful theme ought to gain exposure to both the companies and digital assets leading these advancements. Leveraging our expertise in thematic investing, Global X has developed an efficient strategy with long-term, growth-oriented investors in mind.”
The ETF comes with a total expense ratio (including acquired fund fees) of 0.65%. Distributions are made on a semi-annual basis.