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More Issuers Eye Bitcoin ETF Space

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It seems investors’ interest in the cryptocurrency bitcoin is unlikely to subside soon. Notably, the price of bitcoin fell below $14,000 from a high of over $19,000. Still, bitcoin's price has soared about 14 times this year.

It hit several all-time highs this year, despite caution by several central banks. As far as regulatory success is concerned, the first futures contract on Chicago Board Options Exchange (CBOE) was launched on Dec 10, and resulted in re-filings of futures-based bitcoin ETFs. The dream run continued despite the conservative stance of many central banks and analysts (read: Bitcoin ETFs: What Lies Ahead in 2018?).

ETF Issuers’ Renewed Interests

With Cboe Global Markets launching three bitcoin futures contracts on the Cboe Futures Exchange, hopes are high in the space. The introduction of bitcoin futures will result in more liquidity and legitimacy in cryptocurrency trading. Since investors will now have a regulated way to buy and trade into the digital currency market, investors will throng this space.

Already, REX has refiled for two ETFs, namely REX Bitcoin Strategy ETF and REX Short Bitcoin Strategy ETF with the Securities and Exchange Commission (SEC) while VanEck has re-applied for the VanEck Vectors Bitcoin Strategy ETF. Both issuers took back their initial filings a few months ago at the request of the SEC (read: Bitcoin ETFs Are Back After Futures Launch).

Direxion, GraniteShares Intend to Join the Bandwagon

Direxion and GraniteShares have also showed interest in the bitcoin boom. Direxion plans to launch the Direxion Bitcoin ETF, which will be actively managed. The fund looks to offer total return that surpasses that of bitcoin futures contracts over a complete market cycle.

“The fund intends to achieve its investment objective by investing, under normal circumstances, in bitcoin futures contracts traded on the CME and/or CBOE futures exchanges and swaps on bitcoin futures contracts that trade on the CME and/or CBOE future exchanges (the “Bitcoin Futures Contracts”)”, per the prospectus.

On the other hand, GraniteShares plans to launch GraniteShares Bitcoin ETF and the GraniteShares Short Bitcoin ETF, which will both invest in front-month bitcoin futures.

Per the prospectus, the funds, structured as commodity pools, are passively managed, and will offer long as well as short exposure positions in bitcoin futures. GraniteShares is the only firm among the latest filings looking to launch a product structured as a commodity pool, per etf.com. All the other newly-filed products are structured as 1940 Act funds, according to the source.

Bottom Line

Given the enthusiasm, the first pure-play bitcoin ETF may be around the corner. Eric Balchunas of Bloomberg noted that the first bitcoin ETF would become a billion-dollar product soon after the launch. Mike Poutre, CEO of The Crypto Company, believes that the entire industry will be worth $5 trillion by the end of 2018. The founder of Standpoint Research expects another 500% increase from the current level.

The exchange-traded products, if approved, may face competition from ARK Innovation ETF (ARKK - Free Report) . The fund invests about 5.32% of its assets in bitcoin. On the other hand, since some view the cryptocurrency as “digital gold,” bitcoin trading may take away some buyers from SPDR Gold Trust GLD. Bitcoin’s un-correlated nature to the other asset classes and strong momentum may hurt GLD (read: How the Bitcoin Rally is Impacting Gold ETFs).

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