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(Kitco News) – Institutions are now clamoring for the launch of Ether (ETH) futures ETFs for clients in the United States, following a rush by some of the world’s largest money managers to submit spot applications for Bitcoin (BTC) exchange-traded funds (ETF).
According to a post by Bloomberg ETF analyst James Seyffart, five major asset managers have now submitted applications for ether-related ETFs in the past few days.
“We have officially filed five different Ethereum futures ETF applications with the SEC,” Seyffart said. “I would like to know what has changed since May other than the fact that someone (Volatility Shares) applied on Friday. ProShares went straight for the inverse/short ETF.”
Submissions for Ether ETFs. Source: Twitter
Seyffart’s post came in response to a post from Bloomberg ETF analyst Henry Jim, who noted that the four futures-based ether ETF re-filings and the one new filing “all take effect from October 16.”
The five products are the Bitwise Ethereum Strategy ETF, the Roundhill Ether Strategy ETF, the VanEck Ethereum Strategy ETF, the ProShares Ether Strategy ETF and the newly submitted ProShares Short Ether Strategy ETF.
In addition to the products identified by Seyffart and Jim, digital asset manager Grayscale has also submitted two applications for a proposed Grayscale Global Bitcoin Composite ETF and a Grayscale Ethereum Futures ETF.
According to Grayscale’s SEC filing, the ether futures ETF will invest in futures contracts to be traded on the Chicago Mercantile Exchange (CME). The Fund will invest primarily in “Cash Settled Front Month Ether Futures” which are “the shortest expiry date” contracts.
“The fund may also invest in backward-month, cash-settled ether futures contracts,” the filing reads. “As futures contracts near expiration, they can be replaced by similar contracts that expire later. This process is called “rolling”. The fund intends to “roll” its ether futures before expiry.
Volatility Shares’ SEC filing states that the Ether Strategy ETF invests its assets in “cash-settled contracts related to ether traded only on an exchange registered with the Commodity Futures Trading Commission, currently CME, and in will invest in cash equivalent instruments.” or high quality securities serving as collateral for the Fund’s investments in Ether futures contracts.” This Fund will not invest in Ether directly.
Volatility Shares also intends to enter into cash-settled ether futures contracts as a buyer. In cash-settled futures markets, counterparties typically pay cash to the buyer when the price of a futures contract increases, while the buyer would pay the counterparty when the futures contract price decreases.
VanEck’s filing is similar to Volatility’s filing aside from plans to become a buyer, noting, “The fund seeks to invest in ETH futures so that the total value of ETH in which the fund has an economic interest is approximately 100%.” the total assets of the Fund.”
In the event that the fund’s exposure to ETH exceeds 100% of its net assets, “the fund will generally have leveraged exposure to the value of ETH,” the filing reads. “This means that any change in the value of ETH will generally result in proportionally larger changes in the fund’s NAV, including the possibility of greater losses, than if the fund’s exposure to the value of ETH was unleveraged.”
The ProShares Short Ether Strategy ETF will invest in day contracts that aim to profit from falls in the S&P CME Ether Futures Index.
“If the fund succeeds in meeting its investment objective, it should gain about as much as the index loses if the index falls on any given day,” the filing reads. “Conversely, if the index goes up on any given day, it should lose about as much as the index gains. The fund does not aim to achieve the inverse (-1x) of the daily performance of the index for any period other than one day.”
The Bitwise Ethereum Strategy ETF filing is also similar to the other filings, stating, “The fund will invest in ETH futures contracts exclusively through a wholly owned subsidiary of the fund organized under the laws of the Cayman Islands.” The fund will do not invest directly in ETH futures contracts” but instead invest in first month cash-settled ETH futures contracts and last month cash-settled ETH futures contracts.
Stressing that “the fund does not invest in, nor seek direct exposure to, the current ETH spot or cash price,” Bitwise said, “Investors seeking direct exposure to ETH price should consider investing. “Except the fund.”
While crypto advocates have welcomed the surge in institutional interest, the sudden spate of filings has many wondering what has changed over the past few months, prompting companies to increase their focus on digital assets.
“As early as June, the SEC [advanced] multiple applications for the US’s first spot bitcoin ETF,” said Bradley Duke, founder and chief strategy officer of ETC Group. “Now we’re seeing yet another flood of applications for Ethereum futures-based ETFs, including an inverse ‘short’ ETF from Proshares.”
“What changed, what triggered this sudden flow of applications, remains a mystery,” he continued. “It seems clear that there appears to be a growing acceptance at the SEC that crypto is an inevitable part of the American investment landscape, and this is good news for crypto investors and service providers around the world.”
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