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The leveraged Bitcoin ETF will deliver 1.25x returns to the BTC reference rate and will trade on Nasdaq allowing investors to hold derivatives such as futures, swaps, options and forwards.
After launching its Bitcoin Futures ETF last week, investment giant Valkyrie is making the next move. On Tuesday, October 26, Valkyrie filed for a leveraged Bitcoin Futures ETF with the US Securities and Exchange Commission (SEC).
The filing notes that the Valkyrie XBTO Leveraged Bitcoin Futures ETF will trade under the ticker symbol BTFX. The fund seeks to provide additional returns of 1.25x returns to the Bitcoin reference rate. The Valkrie Bitcoin ETF (BTFX) will trade on Nasdaq and will be able to hold derivatives such as futures, swaps, options and forwards. In the official filing, Valkyrie noted:
“The Fund presents different risks than other types of funds. The Fund may not be suitable for all investors and should be used only by knowledgeable investors who understand the consequences of seeking daily leveraged (1.25x) investment results, including the impact of compounding on Fund performance.”
While the spot Bitcoin ETF remains a distant dream, Valkyrie has been working around the futures-based Bitcoin ETFs as favored by the SEC. Steven McClurg, chief investment officer at Valkyrie believes that the spot Bitcoin ETF could come in the next month of November or by early 2022.
Strong Demand for Bitcoin ETF
There’s a strong demand for Bitcoin ETFs currently in the market. The ProShares Strategy Bitcoin ETF hits $1 billion in assets just within two days of the launch. Valkyrie also witnessed strong trading volumes upon the launch of its Bitcoin strategy ETF last Friday.
Amid this high demand, Valkyrie has decided to venture into leveraged products. Speaking of this development, Eric Balchunas, an analyst with Bloomberg Intelligence said:
“I’m not shocked issuers are already onto leveraged products – this is what happens when you have a hit. What’s intriguing about this one is it’s 1.25-times, which is like Diet Coke – it’s really minor. We all know tracking Bitcoin using futures has a roll cost so not only will this attract traders who might want a little extra pop, but it’s possible if Bitcoin goes on a run, that little bit of leverage could offset the roll cost. On the flip side, if there’s volatility, it will likely corrode the returns medium and long term.”
Since the launch of the ProShares strategy Bitcoin ETF last week, BTC has been trading under pressure. As of press time, Bitcoin is trading 2.48% down at $60,704 with a market cap of $1.114 trillion.