SEC Rejects Valkyrie Application For Leveraged Bitcoin Futures ETF

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.

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.

Read also: Bitcoin Price Surpasses $63K as US Bitcoin ETF Launches

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.

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.

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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