VanEck managed to bounce back last week after the Securities and Exchange Commission (SEC) defeated ETF sponsors and rejected VanEck’s bid for a physically backed Bitcoin exchange trading fund.
After years of filing with the SEC to launch a Bitcoin ETF, which tracks the coin’s spot price, VanEck got the opportunity to track Bitcoin futures this week by launching the cheapest Bitcoin futures ETF. He joined an elite group.
The VanEck Bitcoin Strategy (XBTF) ETF was listed on the Chicago Board of Exchange (CBOE) on Tuesday. Aggressively managed funds entered the cryptocurrency market with a big swing, aiming for capital increase by investing in bitcoin futures with cash over the past month.
November, when Bitcoin hit a record high of $68,789.63, the leading cryptocurrency fell 16 percent to $58,044.21. XBTF opened on Tuesday for $63.91. It closed at $58.08 on Friday, down 9% for the week.
Kyle DaCruce, Director of Digital Asset Products at VanEck, said in a statement: …
The SEC’s wariness of ETFs holding bitcoin is evident in their refusal to approve all spot ETF applications. Last Friday’s decision said it did not believe that a Bitcoin ETF venue “could prevent fraudulent and manipulative acts and practices and protect the interests of investors and the public”.
The SEC also stated that the CBOE does not have oversight and sharing arrangements to detect fraud and market manipulation regarding the underlying assets.
Futures, on the other hand, do not track the spot price of an asset. A futures contract is a binding contract that buys or sells a specific commodity or security on a specific date at a specific price.
Prior month contracts mean they expire within one month and are usually the most traded and most liquid contracts for the asset.
Contracts must be canceled every month to avoid delivery of assets. This causes transaction costs and can lead to higher acquisition costs if the previous month’s contract price is higher than the previous month’s. A good example of this is the US Petroleum Fund (USO). ETFs went crazy when oil prices dropped last year.
VanEck won the title of low-cost market leader in Bitcoin futures ETFs with a fee ratio of 0.65%. That’s 30 basis points less than the first ETF in the US to offer investors exposure to Bitcoin futures. (100 basis points equals 1 percentage point.)
The ProShares Bitcoin Strategy ETF (BITO), launched on October 18, calculates a 0.95% spend ratio. According to Morningstar, BITO raised $1.4 billion in total assets in just one month.
The Valkyrie Bitcoin Strategy ETF (BTF) is another Bitcoin futures ETF. Launched three days after BITO, it costs 0.95% and has a total net worth of $57.2 million, according to Morningstar.
The Bitcoin ProFund Investor (BTCFX) strategy is a mutual fund that holds Bitcoin futures and calculates an expense ratio of 1.15%. It’s up 41% since launching in late July, but his total net worth is just $29.5 million, according to Morningstar.
XBTF primarily invests in Bitcoin futures, which are listed and traded on the Chicago Board of Trade (CME). Bitcoin futures have grown rapidly over the past three years.
According to the CME Group, the average daily open positions for CME Bitcoin futures increased from $77 million in the first quarter of 2018 to approximately $1.5 billion at the end of the third quarter.