The Bitcoin ETF Holy Grail — Another Firm Attempts the OddsAgainst SEC
According to public records, another company has filed with the U.S. Securities Exchange Commission to create two bitcoin exchange-traded funds (ETF) based on Bitcoin derivatives. ETF firm Proshares Capital Management aims to get its bitcoin-futures products listed on the New York Stock Exchange (NYSE) with a proposed maximum aggregate offering price of $1M per ETF.
U.S. Firm Proshares Files for Two Bitcoin ETFs
Proshares is an ETF management firm that launched in 2006 and offers over 140 alternative funds that cover a broad spectrum of investments. The company has products listed on the NYSE, Chicago Board of Options Exchange (CBOE), Nasdaq, and other mainstream trading platforms. Now the Maryland-based business is creating its “Proshares Trust II” a bitcoin ETF that derives its Net Asset Value (NAV) from derivatives rather than holding the currency in reserves.
Proshares further states in its Form S-1 filing that the Bitcoin-based funds are not appropriate for all investors and investing in the shares involves significant “risks.”
“The funds are not appropriate for all investors and present many different risks than other types of funds, including risks relating to investing in bitcoin futures contracts, exposure to bitcoin, and, in the case of the Inverse Fund, risks associated with the use of leverage,” explains Proshares S-1. “The performance of the bitcoin futures contracts in which each fund invests, and therefore the performance of the funds, can be expected to be very different from the price of bitcoin.
The value of a fund’s investments in bitcoin futures contracts may not be correlated with the price of bitcoin and may go down when the price of bitcoin goes up (and vice versa).
Other Mainstream Bitcoin Investment Vehicles and Attempts
The Proshares ETF filing follows other companies trying to create these bitcoin-based mainstream investment vehicles. Just recently, the U.S. Commodity Futures Trading Commission approved the firm Ledger X’s Swap Execution Facility for bitcoin options. Additionally, the well-known CBOE Holdings Inc. plans to add bitcoin futures to their product list. However, financial management firm, CME Group, said it would stop its plans to list bitcoin futures. The recent filing also follows Grayscale Investments and Van Eck Associates withdrawing proposals for two U.S. based funds.
Bitcoin Technology and Regulatory Guidelines Continue to Evolve
Proshares says it understands that bitcoin is a nascent technology and explains how different the bitcoin economy is throughout the entire S-1 filing. For instance, the firm says “bitcoin is a new technological innovation with a very limited operating history, and the price of bitcoin on the bitcoin exchange market is highly volatile, which could have a negative impact on the performance of Bitcoin Futures Contracts and the performance of the Funds.”
Bitcoin is available for trading 24-hours a day and, as such, the price of bitcoin may change dramatically when the market for bitcoin futures contracts is closed or when shares are not available for trading on the exchange.
In addition to emphasizing that bitcoin is still a very new technology, Proshares also notes that regulatory guidelines towards the decentralized asset are still in the gray area too.
“The global regulatory landscape for bitcoin and other digital assets has been inconsistent and continues to evolve,” Proshares concludes. The U.S. regulatory landscape may give Proshares some trouble with its filing submitted this past Wednesday due to the recent proposal withdrawals of other U.S. ETF attempts. According to Van Eck Associates, the SEC asked the firm in a formal letter to withdraw its trust amendment until bitcoin derivatives instruments exist.
What do you think about Protoshares filing for two new bitcoin-based ETFs? Let us know in the comments below.
Images via Shutterstock, Proshares, and the SEC S-1 filing.
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