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According to a report by the Wall Street Journal, an anonymous source revealed that the SEC has asked Valkyrie to discontinue plans to list a leveraged Bitcoin Futures ETF. The SEC action is an indication that the agency would want to limit bitcoin-based ETF applications to strictly futures.
Meanwhile, the development comes two days after the asset manager applied for the product. According to the prospectus, Valkyrie is looking to offer a 1.25 leveraged Bitcoin Futures ETF. Also, the product will hold swaps, futures, and options, and forwards, and will trade under the ticker symbol BTFX following the SEC’s approval.
On the same day of Valkyrie’s application, ETF issuer Direxion also revealed the Direxion Bitcoin Strategy Bear ETF in an SEC filing, which “seeks to achieve its investment objective through managed short exposure to bitcoin futures contracts (the “Bitcoin Futures”).” Similar to other BTC futures products, the fund will not directly invest in bitcoin.
Bloomberg’s Senior ETF analyst Eric Balchunas, also mentioned the SEC’s rejection of the Valkyrie application, stating that the same decision could apply to Direxion’s product, which Balchunas called an inverse fund application.
After rejecting and delaying decisions on several applications for years, the SEC finally approved the first Bitcoin Futures ETF in the U.S. from Proshares on October 19. While this was a milestone for the cryptocurrency industry, a futures ETF is different from a spot Bitcoin ETF, as the latter directly invest in bitcoin.
The ProShares product saw an impressive performance, accumulating over $1 billion in assets under management (AUM) in just two days of trading. The US saw another Bitcoin Futures ETF from Valkyrie debut its trading on the Nasdaq exchange within the same week.
According to Valkyrie’s CEO, Leah Wald at the time:
VanEck, a global investment manager, was reportedly scheduled to list its Bitcoin Futures ETF on the New York Stock Exchange (NYSE).
Although previous applications were regular Bitcoin ETFs, the latest shift to BTC Futures funds could be as a result of comments by the SEC chairman. While speaking at the Aspen Conference in August, Gary Gensler noted that he would prefer bitcoin futures ETFs that traded on the Chicago Mercantile Exchange (CME).
Later in September, Gensler reiterated his preference for bitcoin investment vehicles that were based on futures contracts, rather than funds that invested directly in bitcoin.