Valkyrie unveils US’s second bitcoin futures ETF

Oct 25th, 2021 | By | Category: Alternatives / Multi-Asset

Nashville-based Valkyrie Funds, an alternative finance firm focused on the digital asset ecosystem, has launched the Valkyrie Bitcoin Strategy ETF (BTF US) on Nasdaq.

Valkyrie unveils second bitcoin futures ETF in US

Valkyrie’s Bitcoin Strategy ETF attracted notably less interest on debut compared to the ProShares Bitcoin Strategy ETF.

The fund becomes the second bitcoin-focused ETF to list in the US following the launch of the ProShares Bitcoin Strategy ETF (BITO US) on NYSE Arca on 19 October.

A third bitcoin-linked ETF, from VanEck, is expected this week, and several more filings are currently making their way through the US Securities and Exchange Commission pipeline.

As the first mover, ProShares appears to have gained an initial advantage with BITO gathering more than $560m in net inflows on its debut and seeing more than 24 million shares change hands.

By the end of its second day, it had reached total assets under management in excess of $1.1 billion.

BITO’s trading activity ranks it as the second most popular ETF debut in history, while the fund has also claimed the accolade of fastest to reach $1 billion in assets, a title previously held by the SPDR Gold Shares (GLD US) which hit the milestone three days after its debut in November 2004.

In comparison, Valkyrie’s BTF recorded 3.1m shares traded on debut, representing a turnover of approximately $75m. The ETF’s total assets under management figure has not yet been updated.

Both BITO and BTF obtain indirect exposure to bitcoin by investing in cash-settled, front-month bitcoin futures contracts traded on the Chicago Mercantile Exchange.

Both come with expense ratios of 0.95%.

VanEck’s Bitcoin Strategy ETF, which will trade under the ticker XBTF US, is due to list with a fee of 0.65%.

The SEC’s approval of bitcoin ETFs – albeit only of future-based products – has lent weight to the arguments of those who see digital assets as a legitimate investment asset class, and it will likely accelerate their adoption into traditional portfolios.

According to a recent survey by cryptocurrency exchange and custodian Gemini, the number of Americans invested in digital assets is expected to increase by roughly 150% in 2022, from 21m to 51m.

Commenting on the launch, Leah Wald, CEO at Valkyrie, said: “This Bitcoin Strategy ETF is a major leap forward for this asset class. It enables investors to participate in the digital asset markets through a regulated, transparent product that trades on a trusted, reliable exchange and can be bought and sold as easily as any other investment currently available.”

Tim McCourt, Global Head of Equity Index and Alternative Investment Products at Chicago Mercantile Exchange Group, added: “The approval of ETFs based on CME Bitcoin futures is a positive development for the broader bitcoin ecosystem and a reflection of the strong growth and client demand for exposure to bitcoin via our transparent, deeply liquid, and regulated futures contracts.”

Futures-based bitcoin ETFs are not without drawbacks, however. Because of the presence of a negative roll yield, they are arguably better suited for enacting a short-term position than delivering a long-term allocation. The ETFs’ one-year rolling costs, estimated by annualizing the current roll yield between the October and November bitcoin futures contracts, is a staggering 19.3%.

Buy-and-hold investors would likely be better off investing in a directly-backed bitcoin product that tracks the cryptocurrency’s spot price. But when, or indeed whether, the SEC will approve the listing of directly backed bitcoin ETFs is unclear.

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