Countdown of the seven Ethereum futures ETF filing companies

Source: Decrypt

Compiled by: LianGuaiBitpushNews Mary Liu

Recently, the enthusiasm surrounding spot Bitcoin exchange-traded funds (ETFs) has cooled down, and issuers and investors are still waiting for approval from US regulatory agencies for this investment tool. Ethereum futures ETFs, on the other hand, have emerged like mushrooms after rain.

According to public filings, seven companies have submitted applications for Ethereum ETFs. Tracking Ethereum futures ETFs essentially means investing in futures contracts of the second largest cryptocurrency in the industry, which trade on the Chicago Mercantile Exchange (CME) regulated by the Commodity Futures Trading Commission (CFTC), rather than directly holding the underlying assets.

Whether these filings will be rejected and whether the SEC will approve them is still a pending question, especially considering the recent crackdown on the cryptocurrency industry by regulatory agencies and the fact that the SEC classifies almost all cryptocurrencies (except Bitcoin) as securities.

Volatility Shares: Ethereum Strategy ETF

Filing Date: 07/27/2023

SEC Response: 10/11/2023Exchange: CBOE BZX Exchange

Volatility Shares manages four exchange-traded funds worth $173.5 million. In the filing submitted to the SEC on July 28th, the company outlined its plans to potentially become the first issuer focused on Ethereum ETFs.

The proposed Ethereum Strategy ETF (ETHU) complies with the regulations of the 1940 Investment Company Act governing investment policies and capital structure, and will invest up to 25% of its assets in cash-settled Ethereum futures contracts traded on the CFTC-regulated Chicago Mercantile Exchange (CME).

In addition, according to the filing, the fund may invest in reverse repurchase agreements and stocks of other investment companies, but cannot directly invest in Ethereum.

The fund plans to list on the CBOE BZX Exchange and primarily trade its shares.

The proposed ETHU application comes after the launch of the Volatility Shares 2x Bitcoin Strategy ETF (BITX), which is the first leveraged Bitcoin futures ETF, introduced by a Mt. Kisco-based company in June.

Bitwise: Ethereum Strategy ETF

Filing Date: August 1, 2023SEC Response: October 16, 2023Exchange: NYSE Arca

After withdrawing the initial application in May, Bitwise refiled the Ethereum Strategy ETF (ETHG) on August 1st. According to the filing, ETHG intends to invest in cash-settled, near-month, shortest-dated ETH futures contracts without direct exposure to the current spot price of Ethereum.

Under the 1940 Investment Company Act, the fund is classified as a “non-diversified” fund, which means it can allocate a higher proportion of its assets to a single counterparty or a small number of counterparties’ financial instruments.

The filing provides detailed explanations that the fund will not directly invest in ETH futures contracts; instead, the investments will be made through a wholly owned subsidiary operated under the laws of the Cayman Islands.

In addition, because Bitwise Ethereum Strategy ETF intends to qualify as a regulated investment company, the fund’s investment in the subsidiary will not exceed 25% of its total assets at the end of each quarter of this fiscal year.

Despite such a low allocation, the fund still primarily achieves its investment objectives through investments in ETH futures contracts, with the remaining 75% of assets expected to be invested in U.S. Treasury bonds, other U.S. government securities, and money market funds, cash, and cash equivalents, such as high-quality commercial paper.

Roundhill: Roundhill Ethereum Strategy ETF

Filing Date: August 1, 2023 SEC Response: October 16, 2023 Listing Exchange: Not specified

Roundhill Investments, headquartered in New York, is a registered investment adviser focused on providing innovative financial products aimed at attracting the investment themes of the next generation of investors.

The company currently manages a total of $662 million in assets across eight ETFs and seeks to expand its product range by launching the Roundhill Ethereum Strategy ETF.

According to the filing submitted on August 1, the Roundhill Ethereum Strategy ETF is an actively managed fund that seeks capital appreciation through investments in near-month Ethereum futures contracts listed on the CME.

Similar to Bitwise, the fund plans to invest up to 25% of its assets in a wholly-owned subsidiary formed under the laws of the Cayman Islands.

VanEck: VanEck Ethereum Strategy ETF

Filing Date: August 1, 2023 SEC Response: October 16, 2023 Listing Exchange: Not specified

VanEck is also one of the hopefuls for a spot Bitcoin ETF, and it seems to be heavily investing in Ethereum: according to the August 1 filing, the VanEck Ethereum Strategy ETF plans to invest approximately 100% of its total assets in the total value of ETH.

If the fund is unable to achieve its target exposure due to position limits or liquidity constraints, it may invest in equity securities of ETH-related companies, which the fund advisor believes typically correspond to or are closely related to the performance of ETH or ETH futures listed on U.S. stock exchanges and that the fund advisor believes can provide a return.

The filing states, “For example, the fund may invest in U.S. listed companies that provide digital asset trading platforms.”

In addition to ETH futures, the VanEck Ethereum Strategy ETF is expected to hold a “significant amount” of cash and fixed income investments, which are intended to provide liquidity and serve as collateral for the fund’s ETH futures and participate in the “frequent trading of the portfolio.”

Proshares: Inverse Ethereum Strategy ETF and ProShares Ethereum Strategy ETF

Filing Date: August 1, 2023 SEC Response: October 16, 2023 Listing Exchange: Not specified

On August 1, ETF issuer ProShares applied for two different Ethereum-focused ETFs: the Inverse Ethereum Strategy ETF and the ProShares Ethereum Strategy ETF.

The former seeks daily investment results corresponding to the inverse (-1x) performance of the S&P CME Ether Futures Index, while the latter primarily provides capital appreciation through managing the exposure to listed Ether futures contracts on CME. The investment objective is “non-fundamental,” which means that the board of directors can make changes to it without the approval of the fund shareholders.

Similar to the Bitwise Ethereum Strategy ETF, Proshares Ethereum Futures ETF seeks to qualify as a regulated investment company, which means that the fund’s investment in its respective subsidiaries (also located in the Cayman Islands) will not exceed 25% of the total assets at the end of each fiscal quarter.

Grayscale: Grayscale Ethereum Futures ETF

Filing Date: August 1, 2023 SEC Response: October 16, 2023 Listed Exchange: Not specified

On May 9, Grayscale Investments announced the establishment of Grayscale Funds Trust, a statutory trust structure in Delaware, which includes three new funds: Grayscale Ethereum Futures ETF, Grayscale Global Bitcoin Composite ETF, and Grayscale Privacy ETF.

Just a week later, the company submitted an amended filing to the SEC, removing the mention of the Ethereum Futures ETF, but refiled for issuance on August 1.

The updated filing indicates that the Ethereum Futures ETF is an actively managed fund that primarily achieves its investment objective through the purchase of Ether futures contracts by a subsidiary located in the Cayman Islands.

The fund also plans to hold approximately 100% of its net assets in Ether futures contracts. However, it may also hold a significant amount of cash and cash equivalents investments, such as US Treasury securities or repurchase agreements.

Direxion: Bitcoin Ethereum Strategy ETF

Filing Date: August 2, 2023

SEC Response: October 17, 2023 Listed Exchange: Not specified

According to the filing with the US Securities and Exchange Commission (SEC), the proposed Direxion Bitcoin Ethereum Strategy ETF will invest in Bitcoin and Ether futures contracts, subject to regulatory approval. The ETF may also invest in other ETFs with exposure to futures products.

Direxion, founded in 1997, is well-known in the traditional financial ETF space, specializing in creating investment products for investors seeking opportunities beyond traditional offerings. Their products are index-based and provide investors with directional choices, expanded risk exposure, and rule-based long-term strategies. As of March 31, 2023, Direxion manages approximately $27.5 billion in assets.

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