Bitcoin Under Pressure

The Third Bitcoin Futures ETF to Debut on Cboe Tomorrow

New York-based fund manager VanEck, which manages $80 billion in assets, will launch a bitcoin futures exchange traded fund (ETF) on Tuesday, making this the third such product to come to market in 2021.

According to the Chicago Board Options Exchange (Cboe), the venue of choice for the VanEck application, the new futures ETF comes with significantly lower management fees.

Specifically, VanEck’s Bitcoin Strategy ETF (ticker: XBTF) will charge a management fee of 65 basis points, making it the cheapest Bitcoin fund on the market. By comparison, the first US Bitcoin futures exchange-traded fund, ProShares’ Bitcoin Strategy ETF (BITO), charges a management fee of 95 basis points.

VanEck’s ETF will be the same type of product, namely it doesn’t bet or invest directly in Bitcoin. Instead, XBTF gives investors exposure to the world’s biggest cryptocurrency by allowing them to trade shares that represent futures and other investment vehicles that provide exposure to bitcoin.

When eventually it goes live, the bitcoin ETF shares would help investors get exposure to cryptocurrencies without having to deal with exchanges that often struggle with lack of public trust.

VanEck has previously submitted numerous Bitcoin ETFs to the SEC, but to no avail except for its latest futures fund. Just last week, the Wall Street’s top regulator denied the application for VanEck to launch a physically-backed bitcoin ETF.

Explaining the rationale behind its decision, the agency said VanEck’s proposed fund doesn’t offer protections from the volatile price swings and potential manipulation in the cryptocurrency market. Further, the SEC said the Cboe exchange lacks necessary surveillance capabilities to detect fraud.

The decision, however, wasn’t a surprise to industry watchers, as the SEC has long been skeptical of allowing ETFs to hold bitcoin ever since the Winklevoss twins made the first application in 2013.

“Cost and tax treatment are two essential considerations for investors, and we have made both front and center in the design of XBTF. Investors deserve lower cost, transparent, regulated bitcoin exposures, and we’re pleased to be leading that charge with the launch of XBTF and all of our ongoing efforts in the bitcoin and digital assets space,” said Kyle DaCruz, Director, Digital Assets Product with VanEck.

Nadine Chakar, head of State Street Digital, added: “Our newly launched division, State Street Digital, was created to help drive innovation and address the industry’s evolving shift to digital finance, and we continue to prioritize developing our servicing capabilities as part of our broader strategy for the crypto and digital assets environment. We are pleased to further develop our longstanding partnership with VanEck on this important fund launch.”

There are a number of applications underway to get a physically-backed bitcoin ETF listed, but so far none have been approved by the SEC. The agency only extended the deliberation window or opened the matter to public comments to avoid reaching any decision on a proposal.

VanEck also applied before for a physically-backed exchange-traded product. The first time was in collaboration with blockchain technology company, SolidX. Some had argued that the proposal from New York-based VanEck, the ninth biggest ETF issuer, was more likely to gain approval thanks to plans for a high minimum share price that would discourage retail investors.

However, their collective offering was foiled several times as the SEC cited fears of market manipulation.