VanEck undercuts rivals with lower-cost bitcoin futures ETF

Nov 16th, 2021 | By | Category: Alternatives / Multi-Asset

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VanEck has unveiled the third ETF in the US to provide exposure to bitcoin through futures contracts.

VanEck undercuts rivals with lower-cost bitcoin futures ETF

The fund is 30 basis points cheaper than existing bitcoin-tracking ETFs in the US.

The VanEck Bitcoin Strategy ETF (XBTF US) has been listed on Cboe BZX Exchange and comes with an expense ratio of 0.65%.

The fund’s price tag is notably cheaper than the two existing bitcoin-tracking ETFs available in the US – the $1.4bn ProShares Bitcoin Strategy ETF (BITO US) and $60m Valkyrie Bitcoin Strategy ETF (BTF US) both come with expense ratios of 0.95%.

XBTF is actively managed with day-to-day operations led by Greg Krenzer, Head of Active Trading for VanEck, who has more than two decades of experience trading across a variety of asset classes.

The fund gains its exposure to the world’s largest cryptocurrency by investing in 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.

While the ETF normally invests solely in bitcoin futures, the prospectus notes that the fund may also, under certain circumstances, invest in US-listed equities with a strong positive correlation to bitcoin. It will typically engage in this practice only when it is unable to achieve an effective exposure to bitcoin through the futures market due, for example, to futures position limits or liquidity constraints.

The ETF has been structured as a C-Corp, an approach that VanEck maintains may provide a more efficient tax experience for long-term investors.

XBTF had been cleared for launch in late October; however, VanEck appears to have delayed its introduction while it awaited the SEC’s ruling on the listing of its proposed directly backed spot bitcoin ETF, the VanEck Bitcoin Trust. The SEC denied that application on 12 November, citing ongoing concerns over volatility and the potential for price manipulation in bitcoin’s spot market.

Kyle DaCruz, Director, Digital Assets Product with VanEck, said: “While a ‘physically backed’ bitcoin ETF remains a key goal, we are very pleased to be providing investors with this important tool as they build their digital asset portfolios. Cost and tax treatment are two essential considerations for investors, and we have made both front and center in the design of XBTF. Investors deserve lower cost, transparent, regulated bitcoin exposures, and we’re pleased to be leading that charge with the launch of XBTF and all of our ongoing efforts in the bitcoin and digital assets space.”

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