Through the approval of the Volatility Shares 2x Bitcoin Strategy ETF (BITX), US investors will now have access to the first leveraged ETF based on CME Bitcoin futures starting this week. The SEC granted approval for the product in a surprising decision amidst debates surrounding a spot Bitcoin ETF.
ETF issuer Volatility Shares intends to launch the first fund that aims to achieve double the daily performance of the S&P CME Bitcoin Futures Daily Roll Index. According to the company's website, the 2x Bitcoin Strategy ETF (Ticker: BITX) will be tradable on CBOE this week. The fund carries an expense ratio of 1.85% per annum.
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SEC approves another futures-based bitcoin ETF
The approval of the first leveraged Bitcoin ETF comes just one week after the unexpected filing for a spot-based Bitcoin fund by financial giant BlackRock. However, like all previously approved Bitcoin ETFs, BITX also relies on CME futures contracts. The SEC has consistently rejected funds based on the Bitcoin spot price. Crypto exchanges like Coinbase have been deemed to lack sufficient safeguards against market manipulation—an assertion even questioned by a US judge in the Grayscale case.
With the world's largest asset manager in the race, the chances of approving the first spot Bitcoin ETF are higher than ever before. BlackRock manages $9.5 trillion in client assets and is considered one of the most influential financial institutions worldwide. Moreover, the giant boasts over 400 launched US ETFs. However, approval is far from guaranteed. After all, granting approval for a spot Bitcoin ETF would signify a defeat for the SEC in its battle against the crypto industry.
"At first glance, it looks ridiculous to have a 2x leveraged Bitcoin futures ETF trading on US exchanges while [the SEC]is fighting Grayscale in court and denying any other issuer the attempt to launch a Bitcoin spot ETF." - Bloomberg Intelligence ETF analyst James Seyffart
Other providers pull out
In recent weeks, two issuers discreetly withdrew their applications for similar products to BITX, as reported by Bloomberg. Direxion revoked its application for the Bitcoin Strategy Bull 2X Shares, which also aimed to achieve double the performance of the S&P CME Bitcoin Futures Index on a daily basis. Similarly, ProShares, another ETF issuer, confirmed earlier this month that it withdrew its application for the UltraBitcoin Strategy ETF through a filing with the Securities and Exchange Commission (SEC).
In contrast, issuer Valkyrie currently maintains an active application for its Bitcoin Futures Leveraged Strategy ETF (Ticker: BTFD), which is designed to be actively managed and provide variable leverage. The provider already operates a futures-based Bitcoin ETF, which received SEC approval as the second Bitcoin fund in October 2021. Additionally, Valkyrie briefly threw its hat into the ring regarding BlackRock's application for the first spot ETF.
