Introduction:
Bitwise Investments, the mastermind behind the largest cryptocurrency index fund (BITW), is actively pursuing the transformation of its bitcoin futures exchange-traded fund (ETF) to encompass ether futures as well. This strategic maneuver places the company ahead of its competitors, who are in the process of submitting applications for new ether future ETFs. Meanwhile, ARK Investment Management, in collaboration with 21Shares, is aiming to establish a thematic fund titled “Digital Asset and Blockchain Strategy ETF,” which seeks to provide exposure to bitcoin futures contracts, equities, and bitcoin itself, as outlined in its August 11 filing.
Expanding the Horizons:
Bitwise is intent on converting its Bitwise Bitcoin Strategy Optimum Roll ETF (BITC) into a prospective Bitwise Bitcoin and Ether Equal Weight Strategy ETF, pending approval. This approach benefits from the Securities and Exchange Commission’s (SEC) 60-day conversion timeline, offering a potential shortcut to faster approval compared to the 75 days required for fresh filings. The slated date for the fund’s possible conversion is October 9, a mere two days prior to Volatility Shares’ scheduled launch of its ether future ETF.
In parallel, Valkyrie Investments is treading a similar path, with a proposal to transform its Valkyrie Bitcoin Strategy ETF (BTF) into an ETF capable of integrating ether futures. The company submitted its filing to the SEC on August 4 and anticipates the conversion process to occur by October 3.
Market Dynamics and Product Demand:
This strategic maneuvering aligns with the ongoing race to secure the “first mover” advantage in the realm of cryptocurrency-related ETFs. While the competition for a bitcoin ETF is already underway, industry players are turning their attention to the second-largest cryptocurrency, ether. Ethereum, the platform that powers ether, has witnessed an impressive surge of approximately 55% in value this year, according to data from Coinbase.
Both Bitwise and Valkyrie appear to be responding to market signals indicating a demand for a combined product that encompasses both ether and bitcoin, rather than ETFs that exclusively track one of these cryptocurrencies. This sentiment is echoed by Steven McClurg, Chief Investment Officer of Valkyrie Investments, who emphasized the market’s preference for a blend of the two leading digital assets.
Regulatory Uncertainty:
The prospects of approval for an ether futures ETF remain uncertain within the regulatory landscape. The SEC has yet to make a definitive determination regarding whether ether should be classified as a security or as an asset more akin to a commodity. This classification holds the potential to significantly influence the approval process for ether futures ETFs, as highlighted by Sumit Roy, Senior Analyst at etf.com.
ARK’s Unique Approach:
The forthcoming ARK fund, as articulated in its filing, is set to invest in equity securities of entities within the blockchain, digital asset, and fintech sectors. The fund’s management team will be tasked with strategic decisions regarding the distribution of bitcoin futures contracts, equities, and up to 80% of invested assets in bitcoin futures. Additionally, the fund is open to allocating up to 20% of its resources in “assets in cash or cash equivalents such as U.S. treasuries.”
Conclusion:
The intricate landscape of cryptocurrency-related ETFs continues to evolve as industry players like Bitwise and Valkyrie pivot to capitalize on market demands for combined products featuring both bitcoin and ether. The strategic conversions, alongside ARK Investment Management’s thematic approach, underscore the ongoing race to offer innovative investment opportunities in the realm of digital assets. With regulatory dynamics and market forces at play, the future of these ETF proposals remains a subject of keen industry interest.
