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"Wolf is coming?" Asset management institutions apply for Bitcoin inverse ETF and 1.25x leveraged fund separately, insider: unlikely to be approved

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"Wolf is coming?" Asset management institutions apply for Bitcoin inverse ETF and 1.25x leveraged fund separately, insider: unlikely to be approved

Following the successful launch of the first Bitcoin futures ETF "BITO" in the United States, Valkyrie and VanEck have also launched their funds, while Direxion applied for a unique Bitcoin ETF product yesterday, 10/26, which will allow shorting Bitcoin futures contracts, unlike other Bitcoin ETFs on the market.

Inverse Fund

According to a filing submitted to the U.S. Securities and Exchange Commission (SEC) on 10/26, ETF provider Direxion has launched the "Direxion Bitcoin Strategy Bear ETF," which aims to achieve its investment objectives through short positions in Bitcoin futures contracts on the Chicago Mercantile Exchange (CME).

This fund does not directly invest in Bitcoin spot markets, and in addition to CME holdings, the filing mentions the possibility of shorting "Bitcoin futures ETF" or other Bitcoin futures.

Bloomberg ETF analyst Eric Balchunas commented:

This is essentially like a short index for "BITO." Direxion has already launched a one-times short Bitcoin futures ETF "BITI" in Canada, which, although not great, due to the volatile nature of Bitcoin, such ETFs can still serve a purpose in the market. Additionally, with Bitcoin rising 52% in the past six weeks, there may be market demand for shorting it.

Leveraged ETF

Compared to the shining debut of "BITO," the Bitcoin futures ETF with the symbol BTF from asset management firm Valkyrie began trading on Nasdaq on 10/23, but its first-day trading volume was only about $78 million, far below the nearly $1 billion of the former.

Nevertheless, Valkyrie did not stop there; on 10/26, they submitted a 1.25 times leveraged Bitcoin futures ETF filing called "XBTO Levered BTC Futures ETF with the symbol: BTFX."

BTFX aims to achieve its investment objectives through options, swap contracts, and forward contracts, but the expected financial instrument at the moment is Bitcoin futures, with the SEC having 75 days to review.

Insiders: Unlikely to Pass

According to sources cited by The Wall Street Journal, the U.S. Securities and Exchange Commission (SEC) has at least asked one asset management firm to cease applications for such funds. The source stated:

The SEC wants to confine these new Bitcoin-related ETFs to products without leveraged futures contracts, like last week's "BITO," and Valkyrie's application has been asked to be withdrawn.

It is important to note that the returns from holding "inverse, leveraged funds" for the long term may not necessarily align with the results of investing in the index through external leverage. If held for more than a day and Bitcoin remains flat, these types of ETFs may actually incur losses, with longer holding periods and higher volatility exacerbating the impact on investor returns.