On June 27th, the CBOE first listed the Volatility Shares 2x Bitcoin Strategy futures ETF.
The Volatility Shares 2x Bitcoin Strategy ETF (BITX) opened for trading on the Chicago Board Options Exchange (CBOE) on June 27.
Chang Kim, COO at Volatility Shares, said:
“There’s a big audience that’s already out there for leveraged-type products, and to sort of marry that with the intrinsic interest that there is in all things crypto — that’s why we feel that there’s a pretty good audience out there for this.”
Exchange-traded funds (ETFs) for Bitcoin futures are readily available on the American market. Examples include the ProShares Bitcoin Strategy ETF (BITO) and the VanEck Bitcoin Strategy ETF (XBTF). Leveraged trading, which enables traders to initiate positions worth more than their deposited money and increases exposure to the price swings of the underlying asset, is only available on the BITX ETF, making it the first ETF to do so.
Leveraged trading operates by borrowing the difference between the trade’s value and the trader’s margin (deposit) from the platform provider. This enables traders to increase their potential gains or losses dependent on changes in the asset’s price.
Investors have been warned by the Commodities Futures Trading Commission (CFTC) about management fees, other costs, and the disclosure of risks related to Bitcoin futures ETFs. Before engaging in leveraged trading, investors need to be aware of the costs associated with it and comprehend the potential hazards.
Flood of spot Bitcoin ETF applications
One of the biggest asset managers, BlackRock, applied for a spot Bitcoin ETF on June 15th. As a result, WisdomTree and Invesco were among the many other asset managers to follow suit. The application for spot Bitcoin ETFs shows the institutional players’ increased interest in providing ETFs that directly follow the price of bitcoin rather than using futures contracts.
The U.S. Securities and Exchange Commission (SEC) has not yet authorized a spot Bitcoin ETF application despite the several applications that have been made since 2013. Previous applications were denied as a result of the agency’s worries regarding the “opaque” spot market and price-fixing activities in the cryptocurrency sector.
In terms of pricing, spot ETFs are different from futures ETFs. The spot market serves as the basis for pricing spot ETFs, which is done by averaging the spot prices across numerous exchanges. Futures ETFs, in contrast, get their pricing from the futures market. Additionally, spot Bitcoin ETFs would allow for settlement in BTC, giving investors direct exposure to the underlying asset, as opposed to futures ETFs, which are often settled in cash.
The SEC’s hesitation to authorize a spot Bitcoin ETF underlines the regulatory difficulties and issues with the integrity and structure of the cryptocurrency market. The need for a spot Bitcoin ETF exists despite the fact that futures ETFs provide investors with a way to participate in Bitcoin due to its potential benefits in terms of pricing and settlement.