New Bitcoin ETF Applications: One Short ETF, Another Leveraged ETF

Exchange-traded fund (ETF) issuer Direxion has applied for a product that would allow speculators to buy contracts that short the price of bitcoin.

In a filing with the U.S. Securities and Exchange Commission (SEC) on Oct. 26, the firm unveiled the Direxion Bitcoin Strategy Bear ETF. Like other futures products, it does not invest in BTC directly, but maintains a regulated short position contract issued by the Chicago Mercantile Exchange (CME).

Direxion said the fund may invest in other BTC futures, money market funds, deposit accounts or short-term debt instruments. However, the company did issue a dire warning that the value of the product could go down to zero.

"The value of an investment in the fund could drop significantly without warning, including to zero. You should be prepared to lose your entire investment."

Bloomberg ETF senior analyst Eric Balchunas described it as an inverse bitcoin ETF. He said the firm already has a "-1x BTC futures ETF" in Canada called BITI, adding: "While it's pretty disruptive, when it works, it does this ( Because Bitcoin tends to sell off quickly).”

Direxion originally applied for a bitcoin ETF in 2018, but at the time it ended up being delayed by the US SEC, like all other ETFs.

According to Bloomberg, on October 26, Valkyrie applied for a leveraged BTC futures ETF that would provide 1.25 times exposure to BTC. If approved, it will trade under the symbol BTFX and can hold futures, swaps, options and forwards.

Not everyone is overwhelmed by the minimal leverage available, with user VandelayBTC throwing cold water on it.

1.25 times? What's this? Give the ants leverage?

— Vandelay₿TC Industries (@VandelayBTC) October 26, 2021

Commenting on the innovative futures products being proposed so far, Nate Geraci, president of the ETF Store, said that there will be more such applications and ETH futures before spot products are approved.

“The US SEC supports CME Bitcoin futures from a regulatory perspective. If these leveraged and inverse products exist in other supported markets, there is no reason why they shouldn’t exist here.”

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