First leveraged Bitcoin ETF in the United States quietly opened with a trading volume of nearly $5.5 million on the first day
The first Bitcoin ETF in the US launched quietly, with a trading volume of almost $5.5 million on its first day.
Author: BlockingBitpushNews Mary Liu
New York time June 27th, the first leveraged Bitcoin ETF (stock code: BITX) in the United States began trading on the CBOE BZX exchange.
BITX is a 2x Bitcoin strategy ETF launched by Volatility Shares. According to the company’s website, BITX does not directly hold Bitcoin and is typically equivalent to twice the daily performance of the S&P CME Bitcoin Futures Rolling Index (stock code: SPBTFDUE), seeking to benefit from the daily price increase of Bitcoin futures contracts. The management fee for this ETF is 1.85%, far higher than the 0.95% charged by the first Bitcoin futures ETF BITO in the United States.
Volatility Shares stated in a statement: “Now, US cryptocurrency traders will be able to easily and liquidly obtain leveraged Bitcoin exposure through traditional brokerage accounts, eliminating the need for cryptocurrency trading accounts during periods of legal uncertainty for such platforms.”
According to Bloomberg’s data, BITX traded about $500,000 in the first 15 minutes of its listing, and the first day’s transaction volume was about $5.5 million, making it one of the most successful ETF launches this year.
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Volatility Shares, based in Florida, was founded in 2019 and is known for its leveraged and inverse ETFs. It also has three fund products: 2x Long VIX Futures ETF (UVIX), -1x Short VIX Futures ETF (SVIX), and -1x Short VIX Mid-Term Futures Strategy ETF (ZIVB), with a total scale of $160 million.
SEC Relaxes?
As reported by Blocking earlier, the SEC allowed Bitcoin futures ETFs to go public in October 2021. The first ETF asset launched by ProShares quickly grew to $1 billion, and its AUM remains at this level.
The launch of BITX coincides with BlackRock’s submission of a spot Bitcoin ETF to the SEC. Considering the asset management company’s status and nearly perfect approval history, some market observers believe that this may be a potential good sign for such products to obtain regulatory approval.
Bloomberg News ETF analysts James Seyffart and Eric Balchunas said in a tweet that the US Securities and Exchange Commission’s willingness to allow leveraged Bitcoin futures ETFs may herald “hope” for Bitcoin products.
Balchunas speculated in the tweet that the approval might be an “early sign of the SEC relaxing its guard,” perhaps in consideration of the idea of future types of Bitcoin ETFs.
Nevertheless, some institutional investors have withdrawn their applications. Direxion and ProShares withdrew their 2x Bitcoin Futures applications on June 1st and 7th respectively, and in October 2021, Valkyrie’s leveraged BTC Futures ETF was requested to be withdrawn by the SEC just three days after submission.
James Butterfill, CoinShares’ research director, analyzed that CME’s supervision of Bitcoin futures contracts was a “key reason” for the approval of the Volatility Shares proposal. The main hesitation of the SEC in approving spot Bitcoin ETFs is related to whether spot exchanges are adequately regulated. Butterfill said: “If BlackRock can meet the regulatory requirements for proper supervision of spot exchanges, then spot ETFs are likely to be approved.” “In any case, I expect the approval process to take some time.”
Todd Rosenbluth, head of research at VettaFi, said: “Bitcoin’s strong rebound this year has rekindled investors’ interest. Although there are existing futures-based ETFs, some investors may be willing to take on additional risks for higher returns.”
Growing concerns
Most Bitcoin supporters in the market welcome the launch of BITX, but there are also some voices of opposition. Some industry insiders believe that approving leveraged futures ETFs before simple spot ETFs makes no sense from the perspective of investor protection.
Leveraged funds use debt or financial derivatives (Bitcoin futures in BITX) as leverage to amplify the returns of benchmark indices. This leverage may mean short-term gains for investors, but it can also lead to huge losses. Due to their high-risk, high-cost nature, leveraged ETFs are rarely used for long-term investments.
One Twitter user quipped, “Yes, 2x Bitcoin Futures really protects investors.” Nate Geraci, co-founder of the ETF Institute, tweeted, “This will be one of the most ridiculous chapters in the Bitcoin ETF story in 5 to 10 years… to launch a 2x leveraged futures product before a simple spot ETF, that’s wild.”
The first Bitcoin futures ETF in the US, BITO, is still trailing behind BTC this year. Market data shows that the asset rose 3.45% on Tuesday to $17.57. However, it is still down more than 50% from its historical high of $43.32 in 2021.
Data company VettaFi financial analyst Dave Nadig told Bloomberg that he is skeptical about the launch of spot Bitcoin. He said, “In fact, if they really launch, I doubt their lifespan will be short and will only be used for the narrowest retail use cases.”
