Valkyrie’s leveraged Bitcoin ETF reportedly shot down by the SEC
Ever since the first Bitcoin ETF was launched last week amid a flood of speculation and anticipation, financial institutions all over the U.S. have been rushing to file applications to get approval for their own funds. However, not all of them have proven to be as lucky as ProShares.
In fact, reports suggest that one or maybe both of the latest applications have been shot down by the United States’ SEC within a day or two of being submitted.
Earlier this week, two creative ETFs were filed with the SEC. These strayed from the structure that has currently been approved. Valkyrie had filed for a leveraged Bitcoin Futures ETF and Direxion for an inverse fund for bears. Both of them have reportedly been rejected by the regulatory agency.
This update was first revealed by Bloomberg’s Senior ETF analyst Eric Balchunas on Twitter. He referred to a Dow Jones alert which revealed that the Valkyrie ETF had been vetoed by the SEC. He added that the Direxion inverse ETF is likely to suffer the same fate.
Looks like the SEC not having it w the levered (and likely inverse) Bitcoin futures ETFs. Can’t hurt to try tho. Had they gone through likely billion dollar trading vehicles in a few yrs. via Dow Jones pic.twitter.com/MspMRf3hL9
— Eric Balchunas (@EricBalchunas) October 27, 2021
A Bitcoin Strategy Bear ETF had been filed by ETF issuer Direxion on 26 October. It would have made Futures contracts shorting the price of BTC available to speculators. Valkyrie had also filed for a leveraged BTC Futures ETF shortly afterward, which would have offered 1.25x exposure to the asset.
While the former would have invested only in BTC Futures, the Valkyrie application mentioned holding swaps, options, and forwards, along with Futures. Another Dow Jones alert shared by Balchunas indicated that the SEC is currently apprehensive of funds holding anything but direct Futures contracts bought from the Chicago Mercantile Exchange (CME).
Balchunas also confirmed the same, tweeting,
“Would be interesting (and poss) if they let the Inverse one go through. That one was limited to futures. Valkyrie’s was a bit of a departure from that language.”
Nevertheless, AXS Investments reportedly filed for two more ETFs on 27 October, according to ETF Store President Nate Geraci. While one of them is for a regular Bitcoin Strategy ETF, the other one is a -1x inverse or shorting fund.
In another related development, a Dow Jones alert shared by Balchunas revealed that Grayscale is expecting its spot BTC ETF to be approved within 9 months. Earlier this month, the company had applied to covert its Grayscale Bitcoin Trust (GBTC) into a spot ETF. If approved, it would be directly backed by the asset as opposed to its Futures contracts.
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Author: Anjali Jain