Alejandro ArriecheThe United States Securities and Exchange Commission (SEC) has given the green light to another futures-backed Bitcoin exchange-traded fund (ETF) to be listed in the country – in this case, one managed by Valkyrie Invest, a firm that specializes in offering investment vehicles focused on digital assets.
The XBTO Bitcoin Futures Fund (XBTO) is the name of the fund whose shares will soon hit the trading floor. Same to all other Bitcoin ETFs, Valkyrie will use BTC futures to give retail and institutional investors the chance to get exposure to the cryptocurrency.
Thus far, no spot Bitcoin ETF has been approved by the SEC as the regulator has stated that these vehicles are too risky for investors due to controversies concerning the custody of the digital assets involved and other similar nuances.
This new vehicle from Valkyrie will come to join its exclusive portfolio of crypto-focused funds including its Bitcoin Strategy ETF (BTF), its Bitcoin Miners ETF (WGMI), and several trusts that are only accessible to accredited investors at the moment.
The approval of XBTO comes only a couple of weeks after the SEC also gave the nod to a Bitcoin ETF from Teucrium that uses futures as well to provide exposure to the crypto asset.
Crypto advocates and industry experts have seen these moves as positive signs that the US top financial watchdog may soon approve the widely-expected spot ETF.
“As for a spot Bitcoin ETF, we do believe that today’s news puts us closer to an eventual approval, but would hesitate to put a timeline on such a decision and are instead keen to continue working with regulators to help further satisfy warranted concerns and collaboratively work towards progress in this rapidly evolving asset class,” stated Valkyrie’s Chief Investment Officer, Steven McClurg, responding to an inquiry from crypto news website Blockworks.
Valkyrie did not clarify when the product will be made available to investors or other important details such as the expense ratio of the fund.
What are ETFs and How Futures-Backed Funds Work?
Exchange-traded funds (ETF) are investment vehicles whose shares trade in the same way as a regular stock and they provide exposure to a wide range of asset classes, industries, geographies, and investment methodologies.
A Bitcoin ETF specifically is a vehicle that allows investors to track the performance of the digital asset. These ETFs can be set up either as a trust that holds the digital asset directly or they can be structured to mimic the performance of the underlying asset through the use of derivatives.
Futures-backed Bitcoin ETFs use futures contracts traded in the Chicago Mercantile Exchange (CME) to track the price of the cryptocurrency.
Right now, the only vehicles that hold Bitcoin or any other digital asset directly are structured as trusts and are only available to accredited investors – individuals who have a high net worth or a background in finance.
Bitcoin Keeps Dropping after Bearish Flag Break
The price of Bitcoin remains on a downtrend as it is accumulating a 5% loss so far in May after dropping more than 17% last month.
A widespread risk-off attitude in the markets amid the confluence of various negative catalysts is the reason why the digital asset has kept declining. Market participants continue to be worried about the possibility that central banks will have to adopt more aggressive measures to reduce inflation in their respective economies.
This could drain the system’s liquidity and reduce appetite for risky assets. Moreover, uncertainty related to the war between Russia and Ukraine, and lockdowns in China have also contributed to this wave of pessimism in the financial markets.
A break below the bearish flag pattern shown in the chart above is favoring a negative short-term outlook for BTC with the next relevant support areas being found at $34,500 and $32,500 for a 9% downside risk in the near term.
Cryptoassets are a highly volatile unregulated investment product. No UK or EU investor protection.
This article was written for Business 2 Community by Alejandro Arrieche.
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