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Bloomberg Analysts Say Ethereum Futures ETFs Could Start Trading Soon – Here’s When

According to Bloomberg analysts, Ethereum futures ETFs (exchange-traded funds) could start trading for the first time in the United States as early as next week. This comes just a few hours after the US Securities and Exchange Commission (SEC) delayed decisions on Ark Invest and VanEck ETH spot ETF applications.

Why Ethereum Futures ETFs Could Launch Next Week 

On September 28, Bloomberg Analyst Eric Balchunas said – via a post on X (formerly Twitter) – he was hearing that the SEC wants to accelerate the launch of Ether futures ETFs. Balchunas stated that the commission wants it “off their plate” before the potential US government shutdown. 

The United States government faces a possible partial shutdown at 12:01 a.m. ET on October 1 if Congress fails to pass spending bills for the coming fiscal year, potentially affecting most government agencies’ non-essential operations.

The Bloomberg analyst claims that, in anticipation of this scenario, various Ethereum futures ETF applicants have been asked to update their documents by Friday afternoon in order to commence trading as early as Tuesday, the 3rd of October. 

James Seyffart, another Bloomberg ETF analyst, responded to Balchunas’ revelation, saying that it appears that “the SEC is gonna let a bunch of Ethereum futures ETFs go next week potentially.” It is worth noting that neither of the analysts divulged their sources for this latest development.

According to an earlier note from the analysts, there are 15 ETH futures ETFs from at least nine issuers awaiting the SEC’s approval. In their analysis, Balchunas and Seyffart put forward a 90% chance of Ethereum futures ETFs launching in early October.

The note read:

Ethereum futures ETFs have a 90% chance of launching in October, we believe, with Valkyrie’s Bitcoin futures ETF (BTF) poised to become the first to hold Ethereum exposure on Oct. 3 after a strategy change. We expect pure Ethereum futures ETFs to start trading the following week thanks to Volatility Shares” actions.

Spot Ethereum ETFs In Limbo?

Before this latest update on ETH futures ETFs emerged, the United States Securities and Exchange Commission had pushed the deadlines for ARK 21Shares and VanEck’s Ether spot ETF applications. In separate filings, the commission stated that it would designate a longer period on whether to take action on a proposed rule change for the listings of these Ethereum spot ETFs.

The SEC said:

The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised therein.

The Securities and Exchange Commission also mentioned that it received no public comments on either proposal. Meanwhile, it set December 25 (for VanEck) and December 26 (for ARK 21Shares) as the new deadline for another delay or decision on the Ethereum spot ETFs.

The approval of an ETH spot exchange-traded fund is highly anticipated due to its potential positive impact on the Ethereum price, which has been struggling in the past few weeks. As of this writing, Ether is valued at $1,617, reflecting a 1.6% price jump in the past 24 hours.

Ethereum Futures ETFs

 

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Valkyrie Taps Into Ethereum Momentum With New ETF Filing

In a filing dated August 4, Valkyrie applied to add an Ethereum futures ETF to its Bitcoin Strategy ETF (BTF). However, it would seem this move was pushed back by the SEC as the asset manager has now filed a separate application to offer an Ether futures ETF.  

Valkyrie Moves To Offer Ethereum Futures ETF

In an application dated August 16, Valkyrie seeks the United States Securities and Exchange Commission’s (SEC) approval to offer an Ethereum futures exchange-traded fund (ETF). 

If approved, the fund will not directly invest in Ether. Instead, it will focus on purchasing several ether futures contracts to match the total value of the ether underlying the futures contracts with the net assets of the fund. 

While this fund is relatively similar to the Bitcoin futures ETF, which has existed since 2021, it differs from the Spot Bitcoin ETF, which prominent institutional firms have filed for. Spot ETFs track the crypto asset’s price, while futures ETFs focus on the asset’s future contracts. 

Valkyrie categorically noted this fact as part of its application and stated that investors looking to invest in the price of ether directly should consider investments other than this particular fund.

The application also highlighted the risks involved in investing in this fund as, according to Valkyrie, “the Fund’s investments could decline rapidly, including to zero.” As such, investors should understand that they could lose their entire investment. 

As is common with applications such as this, applicants must prove to the SEC that the underlying asset has a regulated market of significant size. And Valkyrie’s filing stated that its fund would be guided by the futures contracts traded on the Chicago Mercantile Exchange (CME). 

Ethereum price chart from Tradingview.com ( Valkyrie ETF)

No First Mover Advantage?

Valkyrie failed to clarify the status of its initial filing in its most recent application. The asset manager had previously tried to add ETH futures contracts to its Valkyrie Bitcoin Strategy ETF (BTF) in a bid to gain a first-mover advantage over other applicants. 

Several other asset managers, including Bitwise, ProShares, Grayscale, and Volatility Shares, have also applied to offer an Ethereum futures ETF. However, it remains uncertain in what order the SEC is likely to approve (if it does) these applications, especially with this recent development. 

Just like Cathie Wood has suggested regarding the pending Spot Bitcoin ETF applications, the SEC can approve multiple applications at once, which will likely eliminate the first mover advantage, or it can decide to approve them in the order in which these applications came in. 

Despite expectations that the regulator will approve an Ether ETF this year, the probability of the SEC approving any of these applications remains uncertain as optimism dwindles. 

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Valkyrie Rockets Into Action: Files For ETH Futures ETF With SEC

Asset management firm Valkyrie has taken a significant step by filing for an Ether or Ethereum (ETH) futures exchange-traded fund (ETF) called “Valkyrie Ethereum Strategy ETF” with the United States Securities and Exchange Commission (SEC). 

Valkyrie Ether Futures ETF Include Secure Collateral Investments

According to the filed documents on August 16, the proposed ETF will not directly invest in Ether, the native token of the Ethereum blockchain. Instead, it aims to acquire a portfolio of Ether futures contracts. 

These contracts are traded on commodity exchanges registered with the Commodity Futures Trading Commission (CFTC), primarily focusing on contracts traded on the Chicago Mercantile Exchange (CME). 

The value of these futures contracts will be determined by the CME CF Ether Reference Rate, which tracks the price of Ether across selected cash exchanges.

Per the filing, the Fund intends to employ a “rolling” strategy to manage the expiration of futures contracts. As contracts approach their expiration date, they will be replaced by similar contracts with later expiration dates. 

These contracts allow investors to speculate on Ether’s future price movements without owning the digital asset directly. 

Apart from Ether futures contracts, the Fund will invest its remaining assets in cash, cash-like instruments, or high-quality securities, collectively called “Collateral Investments.” 

These may include U.S. Government securities, money market funds, and corporate debt securities rated investment grade or comparable quality. Collateral Investments serve the purpose of providing liquidity and satisfying margin requirements for the Fund’s futures portfolio. 

In addition, the Fund may engage in reverse repurchase agreements to help maintain the desired level of exposure to Ether futures contracts.

These factors are expected to position the proposed Ether ETF favorably with the SEC, as it aligns with their requirements. Therefore, there is optimism for a promising decision in support of the Ether ETF application.

Options Market Supports BTC And ETH Amid Strong US Economy

The strength of the US economy has propelled the US Dollar Index (DXY) to deliver a sharp performance, exerting continued pressure on the cryptocurrency market. However, despite liquidity challenges, the gradual decline in Bitcoin (BTC) and ETH prices has not exceeded expectations. 

Fortunately, the options market continues providing substantial price support for BTC and ETH, ensuring stability without external liquidity.

Digital asset management platform Blofin has closely analyzed the options market and identified significant factors contributing to the ongoing support for BTC and ETH. 

Positive gamma has impacted BTC, “sticking” its price around the $29,000 mark. Similarly, for ETH, market makers’ hedging behavior around the $1,800 strike price has also provided support, preventing a steeper decline in its price.

Despite the overall support from the options market, Blofin’s analysis reveals a discrepancy in the sentiment of block traders towards BTC and ETH. 

Block traders, who typically execute large-volume trades, believe more strongly in BTC’s resilience than ETH. This preference may stem from BTC’s established position as the leading cryptocurrency and its reputation as a reliable store of value.

Overall, Blofin’s analysis underscores the crucial role the options market plays in supporting BTC and ETH amid liquidity pressures. The positive gamma effect and market makers’ hedging actions have contributed to maintaining the stability of both cryptocurrencies.

ETH

As of the time of writing, the second-largest cryptocurrency in terms of trading volume is trading at $1,825. Following in the footsteps of Bitcoin, Ethereum has experienced a 0.8% decline over the past 24 hours, further extending its downward trend over the past 30 days, resulting in a 4% decline during that period.

Featured image from iStock, chart from TradingView.com

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Valkyrie Unveils Double-Barreled Approach To Launch An Ethereum ETF Alongside A Bitcoin ETF

Valkyrie has applied to the US Securities and Exchange Commission (SEC) to add ETH futures contracts to its Valkyrie Bitcoin Strategy ETF (BTF). 

Valkyrie Makes A Move To Stay Ahead Of The Crowd

Valkyrie’s application represents a move to stay ahead of the crowd. While many have applied to launch their respective Ethereum (ETH) Exchange-Traded Funds (ETFs), Valkyrie has simply moved to include exposure to ETH futures contracts in their existing investment strategy. 

While the likelihood of the SEC’s approving these Ethereum ETFs or in what order remains uncertain, Valkyrie plans to introduce its double-barreled approach on or around October 3, putting its launch date ahead of that of other competitors. 

Part of the filing reads:

In addition, on or about October 3, 2023, the Fund’s name is expected to change to Valkyrie Bitcoin and Ether Strategy ETF. The Fund is expected to continue to trade on The Nasdaq Stock Market LLC under the ticker symbol “BTF”. The foregoing changes will only take effect and are conditioned upon the effectiveness of the Trust’s Post-Effective Amendment No. 23 under the Securities Act of 1933, including any amendments thereto, which has been filed with the Securities and Exchange Commission on August 4, 2023 and contains further information about the changes to the Fund’s name and investment strategy.

Going by SEC Rule 485(a), those who applied for the Ether ETFs can launch 75 days from their respective filing dates if none of the applications before the SEC gets denied. In tandem with the 75 days, the earliest any of these fund managers (the first being Volatility Shares, who applied on July 28) can launch is October 12 (9 days after Valkyrie’s proposed launch if their application gets greenlit by the SEC).

Ethereum (ETH) price chart from Tradingview.com (Valkyrie Bitcoin ETF)

This first-mover advantage can be critical when looking back at history. Although Valkyrie launched its Bitcoin fund in October 2021, it wasn’t the first to do so, as ProShares had already launched its Bitcoin Strategy ETF (BITO). 

Many believe that BITO launching first is one of the reasons it has enjoyed more success compared to Valkyrie’s Bitcoin Strategy ETF (BTF). BITO now has over $1 billion in assets under management (AuM) compared to BTF’s AuM of about $30 million.

Deja Vu?

As Bloomberg Senior ETF Analyst Eric Balchunas noted in a tweet, this isn’t the first time someone is moving to amend an existing fund to launch the first such product in the industry. 

ETF Managers Group has previously moved to convert a Latin American real estate ETF to the ETFMG Alternative Harvest ETF (MJ), so it could be first in line to launch marijuana ETFs in the US – something which has been compared to what Valkyrie is trying to do.