Direxion Files for Bitcoin ETF With a Deviation, to Track Shorts on BTC Futures

American financial services and ETF provider Direxion has filed for its Bitcoin ETF product after more than three years since it last filed one.

Per the company’s filing with the US SEC, the Direxion product, dubbed Direxion Bitcoin Strategy Bear ETF, takes a bit of deviation when compared with other filings in that it will maintain short exposure to bitcoin futures contracts issued by the Chicago Mercantile Exchange.

“The fund will generally maintain its short exposure to bitcoin futures during periods in which the value of bitcoin is flat or declining as well as during periods in which the value of bitcoin is rising,” the filing said.

Direxion said it would not invest the coin directly in Bitcoin; instead, it will inject its capital into other Bitcoin futures ETFs, as well as other financial instruments that can help in capital appreciation. Drawing on the unusual nature of its short position on the ETF, the outfit warns that its product has no guarantee of yielding the desired results, and is thus unsuitable for investors who are not ready to lose money.

“There is no assurance that the Fund will achieve its investment objective and investment in the Fund could lose money. No single Fund is a complete investment program,” the filing reads. 

The advent of the ProShares Bitcoin Futures ETF last week has energized investment managers across the board, and many are becoming creative with their ETF applications. While an actual Bitcoin ETF is still out of reach of investors as the SEC is unconvinced that the market is mature enough and rid of price manipulation. 

Nonetheless, investors now have an array of ways to gain exposure to the premier digital currency. These ways include but are not limited to spot market purchases, Bitcoin Futures ETF, and buying the shares of Bitcoin-focused public companies like Coinbase Global Inc.

Image source: Shutterstock


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SEC reportedly knocks back Valkyrie’s leveraged Bitcoin ETF

Reports are emerging that the U.S. Securities and Exchange Commission has rejected one, or possibly two, recent Bitcoin exchange-traded fund applications signaling that the regulator is not quite ready for more exotic futures products just yet.

Just a day or so after Valkyrie filed for a leveraged Bitcoin futures ETF and Direxion applied for an inverse fund for bears, the SEC appears to have vetoed them both.

On Oct. 28, Bloomberg’s senior ETF analyst Eric Balchunas referred to a Dow Jones alert indicating the Valkyrie leveraged fund had been shelved by the SEC. He added that the move was likely also to apply to the inverse fund application.

On Oct. 26, ETF issuer Direxion filed for a Bitcoin Strategy Bear ETF that would enable speculators to buy futures that short the price of BTC. On the same day, Valkyrie filed for a leveraged BTC futures ETF that would have offered 1.25x exposure to the asset.

The Direxion product invested purely in futures, however, the Valkyrie one would have held futures, swaps, options, and forwards. Another Dow Jones alert reported the SEC only seems interested in direct futures products at the moment, funds that buy contracts from the Chicago Mercantile Exchange (CME).

The regulator does not seem keen to approve any products that invest in the asset itself or anything other than CME futures contracts at this stage. Balchunas confirmed:

“Would be interesting (and poss) if they let the Inverse one go through. That one was limited to futures. Valkyrie’s was a bit of a departure from that language.”

Related: Crypto breaks Wall Street’s ETF barrier: A watershed moment or stopgap?

ETF Store President, Nate Geraci, reported that two more ETFs had been applied for on Oct. 27 from AXS Investments. The SEC filings are for a regular Bitcoin Strategy ETF similar to the two already approved, and another shorting or inverse fund.

Another Dow Jones report states that Grayscale is confident that the SEC will be ready to approve a spot Bitcoin ETF by July 2022.

On Oct. 19, Grayscale filed an application with the SEC to convert its popular Bitcoin Trust (GBTC) into a spot fund that is backed by the asset itself as opposed to futures contracts.

Geraci, commented on the current lack of regulation over spot crypto markets, “So crypto markets/exchanges will be regulated by then? Seems ambitious.”

In related news, VanEck is making final preparations for the launch of its Bitcoin Strategy ETF which will trade under the ticker XBTF. On Wednesday, Balchunas said there was a “good chance” it could start trading on Friday, Oct. 29, but possibly Thursday.


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New Bitcoin ETFs filed: One for bears, the other with ‘leverage for ants’

Exchange-traded fund issuer Direxion has filed for a product that would enable speculators to buy contracts that short the price of Bitcoin.

In a filing made to the U.S. Securities and Exchange Commission on Oct. 26, the company unveiled the Direxion Bitcoin Strategy Bear ETF. Like other futures products, it will not invest directly in BTC, but will instead maintain managed short exposure position contracts issued by the Chicago Mercantile Exchange (CME).

Direxion stated that the fund may invest in other BTC futures, money market funds, deposit accounts, or short-term debt instruments. However, the firm did issue a dire warning that the value of the product could go to zero.

“The value of an investment in the Fund could decline significantly and without warning, including to zero. You should be prepared to lose your entire investment.”

Bloomberg senior ETF analyst Eric Balchunas described it as an inverse Bitcoin ETF. He reported that the company already has a ‘-1x BTC futures ETF’ in Canada called BITI, adding “while it’s gotten pretty wrecked, when it works it WORKS (as Bitcoin tends to sells off fast).”

Direxion originally filed for a Bitcoin ETF in 2018 but it ended up in the queue with all of the others that the SEC had delayed at the time.

Bloomberg reported that on Oct. 26, Valkyrie filed for a leveraged BTC futures ETF that will offer 1.25x exposure to the asset. If approved, it will trade under the ticker BTFX and can hold futures, swaps, options, and forwards.

Not everyone was impressed with the minimal leverage available, with user VandelayBTC referring to a  Zoolander meme to throw shade.

Related: Too popular: Bitcoin futures ETF in danger of hitting upper limit for contracts

Commenting on the creative new futures products being proposed at the moment, ETF Store President Nate Geraci said that there will be more of these types of filings and ETH futures before a spot product wins approval.

“SEC has blessed CME Bitcoin futures from a regulatory perspective. If these leveraged & inverse products exist in other blessed markets, then no reason not to exist here.”

As if in response to the bearish product proposal, Bitcoin prices have retreated 3.6% over the past 24 hours to trade at $60,787 at the time of writing.


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