While the US Securities and Exchange Commission may have given a chance to unleveraged Bitcoin Futures ETFs, it still feels a bit queasy about more complex product offerings.
As per reports by financial news site WSJ, the SEC has asked at least one asset manager to withdraw its application for leveraged bitcoin exchange-traded funds. It is likely that the SEC currently wants to approve products that offer unleveraged exposure to Bitcoin Futures.
This week alone, three US asset managers, Valkyrie, Direxion, and AXS Investments, filed applications for leveraged Bitcoin futures ETFs to the SEC one after another.
However, citing sources familiar with the matter, the report noted that the SEC has instructed Valkyrie to withdraw its application for leveraged ETFs. Valkyrie recently became the second company to launch its Bitcoin Futures ETF on the Nasdaq.
Several volatile-based leveraged ETFs faced extreme losses in 2018, leading to investors losing billions of dollars in assets, the WSJ report pointed out. In addition, the pandemic exacerbated the conditions in 2020, resulting in many leveraged ETFs to report losses.
In a statement issued earlier this month, Chairman Gary Gensler noted that complex ETPs “can pose risks even to sophisticated investors, and can potentially create system-wide risks by operating in unanticipated ways when markets experience volatility or stress conditions.”
There is an unlikely chance that the SEC would approve a physical Bitcoin ETF as well. Currently, ProShares and Valkyrie futures ETFs have started trading on Nasdaq. However, VanEck’s ETF, which was approved earlier this month, has not yet been listed.