SEC reportedly knocks back Valkyrie’s leveraged Bitcoin ETF, but the company remains optimistic. The SEC said in a statement that they “do not approve of ‘leveraged and non-traditional’ vehicles.”
The “SEC reportedly knocks back Valkyrie’s leveraged Bitcoin ETF” is a report from Bloomberg that the SEC has denied the proposed Bitcoin ETF. The decision was met with disappointment by many investors and traders.
According to reports, the Securities and Exchange Commission (SEC) has rejected one, or maybe two, recent Bitcoin exchange-traded fund applications, indicating that the SEC is not yet ready for more exotic futures products.
The SEC seems to have denied both Valkyrie’s leveraged Bitcoin futures ETF and Direxion’s inverse fund for bears, only a day or two after they filed.
On Oct. 28, Bloomberg’s senior ETF analyst Eric Balchunas mentioned a Dow Jones notice saying the SEC had put the Valkyrie leveraged fund on hold. He went on to say that the change will most certainly apply to the inverse fund application as well.
The SEC seems to be against the leveraged (and possibly inverse) Bitcoin futures ETFs. It can’t hurt to give it a go. via Dow Jones pic.twitter.com/MspMRf3hL9 Had they gone through possible billion-dollar trading vehicles in a few years
October 27, 2021 — Eric Balchunas (@EricBalchunas)
Direxion, an ETF provider, filed for a Bitcoin Strategy Bear ETF on Oct. 26, allowing speculators to purchase futures that short the price of bitcoin. Valkyrie applied for a leveraged BTC futures ETF on the same day, which would have provided 1.25x exposure to the asset.
The Direxion product only invested in futures; the Valkyrie product, on the other hand, would have held futures, swaps, options, and forwards. According to another Dow Jones notice, the SEC is now solely interested in direct futures products, which are funds that purchase contracts from the Chicago Mercantile Exchange (CME).
At this time, the regulator does not seem to be interested in approving any products that invest in the asset itself or anything other than CME futures contracts. Balchunas affirmed the following:
“It’d be fascinating (and maybe possible) if they let the Inverse one through. This one was just for futures. Valkyrie’s terminology was a bit of a departure from that.”
Related: Crypto overcomes the ETF barrier on Wall Street: A watershed event or a stopgap?
Nate Geraci, President of the ETF Store, said that AXS Investments has filed for two new ETFs on October 27. The SEC filings are for a traditional Bitcoin Strategy ETF, similar to the two that have previously been authorized, as well as a shorting or inverse fund.
Grayscale believes the SEC will be ready to approve a spot Bitcoin ETF by July 2022, according to another Dow Jones story.
Grayscale submitted an application with the Securities and Exchange Commission (SEC) on Oct. 19 to convert its popular Bitcoin Trust (GBTC) into a spot fund, which is backed by the commodity itself rather than futures contracts.
“So crypto markets/exchanges will be regulated by then?” Geraci wondered, referring to the present absence of control over spot crypto markets. “It seems to be ambitious.”
In related news, VanEck is finalizing plans for the launch of its Bitcoin Strategy ETF, which will be known as XBTF. Balchunas said on Wednesday that there was a “good probability” it will begin trading on Friday, Oct. 29, but it could also happen on Thursday.
When to buy bitcoin 2021 is a question that has been asked for years. The SEC reportedly knocked back Valkyrie’s leveraged Bitcoin ETF, which means it will be another year until we know if the market will support this type of investment. Reference: when to buy bitcoin 2021.
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