Valkyrie Leads the Way: First Ether Futures Exposure in an ETF

While the launch of U.S. spot Bitcoin ETFs remains shrouded in uncertainty, the Securities and Exchange Commission (SEC) seems to have granted its approval for Ether futures funds. Valkyrie, a crypto-focused investment firm, had initially filed with the SEC in August, seeking to transform its Bitcoin Strategy ETF, which primarily held Bitcoin futures contracts, into a fund that would also invest in Ether futures.

A Successful Transition

Valkyrie's endeavour bore fruit. The Valkyrie Bitcoin Strategy ETF began incorporating exposure to Ether futures contracts on a significant scale, a spokesperson from Valkyrie confirmed. The fund's revised investment strategy is scheduled to become officially effective on October 3. At that point, the ETF's name will transition to the Valkyrie Bitcoin and Ether Strategy ETF (BTF).

A Different Approach: Amending the Investment Strategy

Valkyrie's approach to gaining Ether futures exposure stood apart from others in the industry. Instead of launching a new fund from scratch, they opted to amend the investment strategy of an existing fund. This strategic decision placed Valkyrie ahead of other proposed issuers in terms of the potential effective date.

Anticipated Launch of More Ether Futures ETFs

Following Valkyrie's lead, industry experts anticipate the rapid launch of additional Ether futures ETFs. Volatility Shares had kickstarted this wave with a filing on July 31 to introduce an Ether Strategy ETF (ETHU) on October 12. VanEck, another prominent player, teased the "upcoming launch" of the VanEck Ethereum Strategy ETF through a video on its X page, although the exact timing remains undisclosed.

SEC's Potential Speedy Approval

Eric Balchunas, a senior analyst at Bloomberg Intelligence, suggested in a recent post that the SEC might be inclined to expedite the launch of Ether futures ETFs before a potential government shutdown. The SEC had recently filed several delays regarding its decisions on various ETFs, including a spot Bitcoin ETF proposal by Ark Invest and 21Shares. The regulator was not expected to render a decision on the spot Bitcoin ETF until November 11.

Speculation Around Early Disclosures

Observers in the segment speculated that the earlier-than-expected disclosures were driven, in part, by the looming threat of a government shutdown. During a recent hearing, Gary Gensler, the SEC chairman, expressed concerns that a shutdown would leave the commission with a "skeletal" staff, potentially affecting its ability to function efficiently.

Valkyrie's Journey: Two Years in the Making

Valkyrie's success in adapting its existing fund to include Ether futures contracts marks a significant milestone, coming nearly two years after the introduction of the first Bitcoin futures ETFs in the U.S. ProShares had launched its Bitcoin futures product just days before similar funds by Valkyrie and VanEck went live, granting it a first-mover advantage that swiftly propelled its assets under management to over $1 billion.

Past Hurdles and New Possibilities

Several issuers, including Grayscale Investments, had previously applied for Ether futures ETFs in May but halted their plans. Sources indicated that the SEC had conveyed its unreadiness to approve such products at that time. However, Valkyrie's recent success suggests that regulatory attitudes are evolving, opening up new possibilities for cryptocurrency investments in the traditional finance space.

1. blockworks.co