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Asset managers are rushing to file applications for Bitcoin futures ETFs

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At least four money managers have applied for ETFs to invest in Bitcoin futures after Securities and Exchange Commission chairman Gary Gensler revealed that such a fund could be approved earlier this month. But investors may not want them in place of physically deposited Bitcoin ETFs, analysts said.

Valkyrie Investments is the newest fund shop to throw its hats in the ring with the Valkyrie Bitcoin Strategy ETF, which is focused on futures, which announced plans last week.

ETFs don’t invest directly in Bitcoin, they buy Bitcoin futures contracts. When the contract expires, the filing states that the contract will be replaced by a similar contract with a later expiration date.

Meanwhile, VanEck has announced plans to launch a Bitcoin futures ETF similar to a similar fund that was filed in 2017. The previous version was not released.

In addition to investing in Bitcoin futures, the VanEck Bitcoin Strategic ETF will also invest in Canada-listed ETFs that offer exposure to the underlying digital assets, according to Filing.

None of the funds disclosed the expense ratio or the start date.

This article was previously published on Ignite, title owned by FTGroup.

Invesco and ProShares earlier this month submit to launch Bitcoin tracking ETFs that invest in futures.

However, analysts say that even if such ETFs are approved, as Gensler has shown, they may not respond to investors’ desire for Bitcoin ETFs to replicate real estate.

Neena Mishra, ETF Research Director at Zacks Investment Research, says investors are more likely to be drawn to ETFs that invest in physically deposited bitcoin. She compared gold tracking ETFs like the $ 57 billion SPDR Gold Trust and the $ 27.6 billion iShares Gold Trust to ETFs that buy gold futures, including the $ 83 million Invesco DB Gold Fund.

For the fiscal year ended July 31, SPDR Gold Trust raised $ 11.8 billion and iShares Gold Trust raised $ 827 million, according to FactSet. According to ETF.com, the former was launched in 2004 and the latter in 2005. The Invesco DB Gold Fund has now raised $ 61.6 million for the year ended July 31st. This fund was established in 2007.

“Investor education is important, but I think investors understand the difference between Bitcoin futures ETFs and ETFs that actually track Bitcoin,” says Mishra. “Many crypto investors who are really looking for Bitcoin ETFs will be waiting for the latter.”

However, most retail investors looking for Bitcoin exposure may not understand the nuances and complexities of futures-based ETFs with $ 162 million client assets on March 25th. Nathan Gerachi, President of the ETF Store who is the Managed Registered Investment Advisor. He said retail investors likely did not understand the options available that could enable Bitcoin exposure, such as the $ 30 billion Grayscale Bitcoin Trust.

“I don’t know how many people have interacted with people who think GBTC is an ETF, which is alarming,” he said. “ETF issuers must continue to have training, which ultimately leads to investors making sure they understand what they are buying.”

Mishra added that most retail investors did not understand the premium they paid when they bought the Grayscale Bitcoin Trust. The fund charges an annual fee of 2 percent.

Bitcoin futures ETFs can be expensive, but they are unlikely to be more expensive than crypto funds and vehicles already available to investors, said Dave Nadig, chief investment officer and research director of ETF Trends. Says. He said Bitcoin futures ETFs could cost an average of 90 basis points, which would cost in line with the cost of Ark 21Shares Bitcoin ETFs, a physically backed fund awaiting approval. Estimated.

Investors prefer to avoid Bitcoin futures ETFs as futures markets can risk contango if later-expiring contracts are more expensive than contracts near the end date, Mishra said. Maybe. In such cases, she said, ETF performance could suffer and investors could lose money.

Last year’s “super contango” on the oil market was caused by price competition between Saudi Arabia and Russia and exacerbated by a pandemic blockade.

Additionally, Bitcoin futures ETFs (like VanEck’s products) that want to invest in Canadian Bitcoin ETFs can change their strategy or suddenly change their strategy if regulators give a physically backed Bitcoin ETF the green light. Mishra indicated that it could become a fund of funds. Investor.

* Ignites is a news service from FT specialists for professionals in the wealth management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at the following URL: ignites.com ..

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