SEC to Overthrow Valkyrie Leveraged Bitcoin ETF


Reports are emerging that the United States Securities and Exchange Commission has rejected one, or perhaps two, recent requests for Bitcoin exchange-traded funds, signaling that the regulator is not yet quite ready for commodities to more exotic term.

Just about a day after Valkyrie filed a leveraged Bitcoin futures ETF and Direxion requested a reverse fund for bears, the SEC appears to have vetoed both.

Bloomberg’s senior ETF analyst Eric Balchunas on October 28 referenced a Dow Jones alert that the Valkyrie leveraged fund had been put on hold by the SEC. He added that this decision would likely also apply to the reverse fund request.

On October 26, ETF issuer Direxion filed a Bitcoin Strategy Bear ETF that would allow speculators to buy futures contracts that sell short the price of BTC. On the same day, Valkyrie deposited a leveraged BTC futures ETF that would have offered 1.25 times exposure to the asset.

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The Direxion product invested only in futures, however, that of Valkyrie would have held futures, swaps, options and futures. Another Dow Jones alert reported that the SEC currently only appears interested in direct futures, funds that buy contracts from the Chicago Mercantile Exchange (CME).

The regulator does not appear willing to approve products that invest in the asset itself or anything other than CME futures at this point. Balchunas confirmed:

“It would be interesting (and poss) if they let the Reverse pass. This one was limited to futures. Valkyrie strayed from that language a bit.

Related: Crypto Breaks Through Wall Street ETF Barrier: A Turning Point or a Stopper?

ETF Store President, Nate Geraci, reported that two other ETFs had been requested on October 27 by AXS Investments. The SEC filings relate to a regular Bitcoin Strategy ETF similar to the two already approved, and another short or reverse fund.

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Another report from Dow Jones indicates that Grayscale is confident that the SEC will be ready to approve a spot Bitcoin ETF by July 2022.

On October 19, Grayscale filed an application with the SEC to convert its popular Bitcoin Trust (GBTC) into an asset-backed cash fund itself, as opposed to futures.

Geraci, commented on the current lack of regulation in the crypto cash markets: “So will the crypto markets / exchanges be regulated by then? It sounds ambitious.

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In related news, VanEck is making final preparations for the launch of its ETF Bitcoin Strategy which will trade under the ticker XBTF. Wednesday, Balchunas noted there was a “good chance” that it could start trading on Friday October 29th, but maybe Thursday.