The SEC rejected an application from Valkyrie Investments to launch a Bitcoin ETF based on CME- traded futures using 1.25x leverage.
The US Securities and Exchange Commission (SEC) does not intend to approve the listing of Bitcoin exchange-traded funds (ETF) that would allow investors to trade cryptocurrency with leverage.
Valkyrie Investments, whose conventional Bitcoin ETF has already gone public on the Nasdaq exchange, filed an application with the SEC on Tuesday to launch a new fund with a leverage of 1.25x. The regulator asked the firm to withdraw the application, writes The Wall Street Journal, citing a source.
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
Will SEC reject Direxion reverse Bitcoin ETF application?
Bloomberg analyst Eric Balchunas suggested that the Commission is likely to do the same with Direxion's application for a reverse Bitcoin futures ETF. This product would allow market participants to short cryptocurrencies. The prospects for her proposal are unknown.
According to ETF filing rules, the SEC has 75 days for initial consideration of applications. During this time, the regulator may ask organizers to withdraw proposals, but they are not obliged to comply.
“It would be interesting (and possible) if they allowed Direxion,” Eric 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 expert also said that Grayscale Investments expects to convert its Bitcoin trust to ETF within the next nine months (until July 2022). This exchange-traded fund involves buying the first cryptocurrency 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
Recall that Arcane Research analysts considered the chances of launching a spot bitcoin ETF low. They cited the preservation of the discount price of the digital gold firm trust (GBTC) relative to the NAV.
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