The first US-based ETF to offer leveraged long exposure to bitcoin futures contracts is set to launch this week. Volatility Shares plans to debut its 2x Bitcoin Strategy ETF (BITX) on Tuesday, offering investors the opportunity to gain twice the excess return of the S&P CME Bitcoin Futures Daily Roll Index for a single day.
This accessibility to leveraged bitcoin exposure through a traditional brokerage account eliminates the need for a crypto exchange account during times of legal uncertainty for such platforms. The SEC initially permitted bitcoin futures ETFs to come to market in October 2021, with the first one by issuer ProShares quickly reaching $1 billion in assets.
However, the SEC appeared to take issue with leveraged products and asked Valkyrie to pull its filing for a Levered BTC Futures ETF shortly after its launch. The reasons for the SEC’s apparent shift in stance on the matter remain unclear.
On the other hand, the launch of the Volatility Shares’ ETF follows several applications from various fund issuers and exchanges in the past couple of weeks, signaling a new wave of bids for ETFs holding bitcoin directly. Yet, despite continuous attempts by fund issuers for roughly a decade, the SEC has not allowed so-called spot bitcoin ETFs to come to market.
Some analysts believe the SEC’s willingness to allow leveraged bitcoin futures ETFs could signal a general “lightening up” regarding bitcoin products. James Butterfill, head of research at CoinShares, suggests that the CME’s oversight of bitcoin futures contracts could be the key reason for Volatility Shares’ proposal approval. The SEC’s main hesitation revolves around a spot exchange having proper supervision.
Consequently, if large players like BlackRock can satisfy the regulatory requirements for adequate supervision of spot exchanges, it is quite possible that a spot ETF will be approved. Despite the recent developments, the process of approval is expected to take some time.
As the landscape of cryptocurrency continues to evolve, investors and market participants must carefully weigh the benefits and risks associated with these new financial products. The ongoing debate around ETFs reflects the dynamic nature of the space and the importance of proper regulation and oversight in ensuring a sustainable and secure future for all stakeholders.
Source: Blockworks
