Valkyrie Funds, an asset management company, has submitted an application for an Ethereum Strategy exchange-traded fund (ETF) which plans to invest in Ether futures contracts.
As per a recent submission to the Securities and Exchange Commission on Wednesday, the proposed fund, named the Valkyrie Ethereum Strategy ETF, is designed to tap into the increasing demand for Ethereum (ETH) futures.
Instead of taking the conventional route of directly investing in the asset itself, this particular ETF is geared towards investing in Ether’s exchange-traded futures contracts.
In addition to futures, the fund is considering diversifying with collateral investments. These could include high-grade assets like Treasury bonds and commercial paper, aiming to offer investors a chance for capital growth.
In their recent submission, Valkyrie Funds drew attention to the distinct risks tied to both Ether and Ether futures.
The firm underscored the erratic nature and volatility of these investments, cautioning that the worth of stakes in the fund might plummet, even potentially bottoming out at zero.
“Ether and ether futures represent a comparatively nascent asset class,” Valkyrie stated in the document.
Owing to their inherent unique and significant risks, these assets have historically demonstrated substantial price fluctuations. “Investments in the Fund could see a sharp decline, sometimes unpredictably and swiftly, and might even drop to zero,” the filing cautioned.
Notably, Valkyrie Funds isn’t new to cryptocurrency-related offerings. They have previously launched both a Bitcoin Strategy ETF and a Bitcoin Miners ETF for investors.
EU’s First Spot Bitcoin ETF Goes Live
Earlier in the week, Jacobi Asset Management, headquartered in London, unveiled Europe’s inaugural spot Bitcoin ETF. This ETF is set to be listed on the EuroNext Amsterdam Exchange.
Despite receiving a green light from the Guernsey Financial Services Commission (GFSC) back in October 2021, the ETF’s launch was postponed for a year due to unfavorable market dynamics.
Clients investing in this fund will be subjected to a 1.5% yearly management fee. Notably, among the authorized participants involved with the fund are firms like Jane Street and DRW.
This launch of Europe’s maiden spot Bitcoin ETF comes at a time when there’s a notable uptick in applications for similar products in the US market.
In June, the renowned asset management giant Blackrock initiated the process for a spot Bitcoin ETF. This move ignited interest from other industry stalwarts, such as Invesco and Wisdom Tree, leading them to either initiate similar filings or reapply for their Bitcoin ETF products.
Additionally, the Chicago Board Options Exchange (CBOE) lodged a request with the SEC on Fidelity’s behalf for a spot Bitcoin ETF.
However, the SEC sent back these submissions, citing concerns over their clarity and comprehensiveness.
It’s worth noting that while the SEC has given the nod to funds investing in Bitcoin futures, they have not yet sanctioned a fund that directly invests in the digital currency.
The regulatory body has repeatedly raised concerns about insufficient cross-exchange market surveillance. Alongside this, apprehensions related to potential fraud and market manipulation have been key factors behind the SEC’s hesitancy to approve a Bitcoin spot ETF.
Interestingly, the lack of a Bitcoin spot ETF in the market has paved the way for the rise of over-the-counter (OTC) offerings, with Grayscale’s Bitcoin Trust (GBTC) being a notable example.
However, these OTC solutions often come at a higher cost and typically lack the liquidity and efficiency that ETFs can provide to investors.