SEC rejects Valkyrie levered Bitcoin futures ETF application

SEC rejected the application from Valkyrie Investments to launch a levered bitcoin-ETF based on CME-traded futures with 1.25x leverage.

Looks like the SEC not having it w the levered (and likely inverse) Bitcoin futures ETFs. Can’t hurt to try tho. Had they gone through likely billion dollar trading vehicles in a few yrs. via Dow Jones pic.twitter.com/MspMRf3hL9

— Eric Balchunas (@EricBalchunas) October 27, 2021

The SEC issued its decision the day after the filing. The proposal also contemplated investments in swaps, options and forwards.

Bloomberg analyst Eric Balchunas suggested that the Commission would likely also move on Direxion’s inverse bitcoin futures ETF. This product is designed to profit from short positions.

“It would be interesting (and possible) if they let Direxion through,” he wrote.

Would be interesting (and poss) if they let the Inverse one go through. That one was limited to futures. Valkyrie’s was a bit of a deja truer from that language.

— Eric Balchunas (@EricBalchunas) October 27, 2021

The analyst also said that Grayscale Investments expects to convert its Bitcoin Trust into an ETF within the next nine months (by July 2022). The ETF envisages purchasing Bitcoin on the spot market.

Grayscale expects SEC to approve spot bitcoin ETF in only 9 months (July 2022). I’d probably take the over but need more time / info bf giving odds/making call. Story via Dow Jones. pic.twitter.com/vbL49DIQeO

— Eric Balchunas (@EricBalchunas) October 27, 2021

As Arcane Research NAV noted, the odds of launching a spot bitcoin ETF were not high. They cited the persistent discount of the Grayscale Bitcoin Trust relative to NAV.

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