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Along with investing in Ether Futures, the Valkyrie Ethereum Strategy ETF will invest in other instruments like cash, cash-like instruments, or high-quality securities.
On Wednesday, August 16, Valkyrie Funds filed with the US Securities and Exchange Commission (SEC) for a new fund that would specifically invest in Ether Futures. With this, Valkyrie joins the likes of Volatility Shares, Bitwise, and others, who have already submitted their applications for the Ethereum futures ETF.
Dubbed the Valkyrie Ethereum Strategy ETF, the fund aims to offer investors capital appreciation by investing in the ETF contracts on Ether as well as other “collateral investments”. This includes high-quality securities such as commercial papers and Treasury bonds. Note that, unlike the spot ETF contracts, the fund won’t directly invest in Ethereum (ETH). In its filing on Wednesday, August 16, Valkyrie noted:
“Ether and ether futures are a relatively new asset class. They are subject to unique and substantial risks, and historically, have been subject to significant price volatility. The value of an investment in the Fund could decline significantly and without warning, including to zero. You should be prepared to lose your entire investment.”
The filed document highlights that Ether’s classification could vary as either a currency or digital commodity, depending on its role in specific transactions. While some retailers accept it as payment, its use for commercial and retail transactions remains limited. Additionally, Ether can serve as a store of value, despite experiencing notable price volatility at times.
Along with investing in Ether Futures, the Valkyrie Ethereum Strategy ETF will invest in other instruments like cash, cash-like instruments, or high-quality securities. Valkyrie’s application notes that the ETF investment in Ether futures contracts shall be limited to 8,000 contracts per month. This will be in compliance with position limits offered by the Chicago Mercantile Exchange (CME).
Race for Ethereum Futures ETFs
After a strong wave of spot bitcoin ETF applications, the race for Ethereum futures ETFs is also catching up fast. Applications for Ethereum futures ETFs have been submitted by Bitwise, VanEck, ProShares, Grayscale, Volatility Shares, and Roundhill, totaling six companies.
Volatility Shares has been leading the race and was the first to apply on July 28. Volatility Shares has recently stated that its Ethereum Strategy ETF will be live on October 12. The ETF by Volatility Shares centers around trading cash-settled Ethereum futures contracts on the CBOE.
Some market analysts believe that the US SEC is more likely to approve the Ethereum futures ETF than the spot Bitcoin ETF. Bloomberg ETF analysts James Seyffart and Eric Balchunas have raised the likelihood of the US SEC approving a spot Bitcoin ETF this year to 65% from the previous estimate of 50% a few weeks ago. Meanwhile, the probability of an Ethereum ETF approval stands at 75%, although Balchunas suggests a 95% likelihood for Ether futures.