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. Meanwhile, Ethereum futures ETFs have emerged like mushrooms after rain.
According to public documents, seven companies have submitted applications for Ethereum ETFs. Tracking Ethereum futures ETFs essentially involves investing in futures contracts for the industry’s second-largest cryptocurrency, which are traded on the Chicago Mercantile Exchange (CME) regulated by the Commodity Futures Trading Commission (CFTC), rather than directly holding the underlying assets.
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Whether these applications will be rejected and whether the SEC will approve them remains uncertain, especially considering the recent crackdown on the cryptocurrency industry by regulatory agencies and the SEC’s classification of almost all cryptocurrencies (except Bitcoin) as securities.
Volatility Shares: Ethereum Strategy ETF
Filing Date: 07/27/2023
SEC Response: 10/11/2023
Listing Exchange: 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 and may become the first issuer focused on Ethereum ETFs.
The proposed Ethereum Strategy ETF (ETHU) complies with the regulations of the 1940 Investment Company Act regarding investment policies and capital structure. It will invest up to 25% of its assets in cash-settled Ethereum futures contracts traded on the Chicago Mercantile Exchange (CME), which is regulated by the CFTC.
In addition, according to the filing, the fund may invest in reverse repurchase agreements and stocks of other investment companies, but it cannot directly invest in Ethereum.
The fund plans to list on the CBOE BZX Exchange and primarily trade its shares there.
The proposed ETHU application follows the launch of the Volatility Shares 2x Bitcoin Strategy ETF (BITX), the first leveraged Bitcoin futures ETF, introduced by a Mt. Kisco company in June.
Bitwise: Ethereum Strategy ETF
Filing Date: August 1, 2023
SEC Response: October 16, 2023
Listing Exchange: NYSE Arca
After withdrawing the initial application in May, Bitwise refiled for the Ethereum Strategy ETF (ETHG) on August 1. According to the application, ETHG intends to invest in cash-settled, near-month expiration, shortest-term ETH futures contracts without directly touching 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 invest a higher proportion of its assets in financial instruments of a single counterparty or a few counterparties.
The document details that the fund will not directly invest in ETH futures contracts; instead, the investment will be conducted through a wholly-owned subsidiary operating under the laws of the Cayman Islands.
In addition, due to Bitwise Ethereum Strategy ETF intending to obtain treatment as a regulated investment company, the investment scale of the fund in this 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 will still primarily achieve its investment objectives through investment in ETH futures contracts, with the remaining 75% of assets expected to be invested in US Treasury bonds and other US government securities, as well as 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
Listed Exchange: Not specified
Based in New York, Roundhill Investments is a registered investment advisor 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 through the launch of the Roundhill Ethereum Strategy ETF.
According to the filing submitted on August 1, the Roundhill Ethereum Strategy ETF is an actively managed fund seeking capital appreciation through investment 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
Listed Exchange: Not specified
VanEck is also one of the hopefuls for a spot Bitcoin ETF and seems to be heavily investing in Ethereum: according to the filing on August 1, 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 exceeding position limits or liquidity constraints, it may invest in equity securities of ETH-related companies, which the fund advisor believes are typically correlated or closely related to the performance of ETH or ETH futures and are listed on US securities exchanges and deemed to provide returns.
The document states, “For example, the fund may invest in US-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 actively and actively managed investment portfolio.”
Proshares: ProShares Short Ethereum Strategy ETF and ProShares Ethereum Strategy ETF
Filing Date: August 1, 2023
SEC Response: October 16, 2023
Listed Exchange: Not specified
On August 1st, ETF issuer ProShares applied for two different Ethereum-focused ETFs: Inverse Ethereum Strategy ETF and ProShares Ethereum Strategy ETF.
The former seeks to provide daily investment results that correspond to the inverse (-1x) of the daily performance of the S&P CME Ethereum Futures Index, while the latter primarily aims to provide capital appreciation through managing exposure to Ethereum futures contracts listed on CME. The investment objective is “non-fundamental,” meaning that the board can make changes to it without the approval of the fund’s shareholders.
Similar to the Bitwise Ethereum Strategy ETF, ProShares’ Ethereum Futures ETF also seeks to qualify as a regulated investment company. This means that the fund’s investment in its respective subsidiaries (which will also be based in the Cayman Islands) will not exceed 25% of the total assets at the end of each quarter of the fiscal year.
Grayscale: Grayscale Ethereum Futures ETF
Filing Date: August 1, 2023
SEC Response: October 16, 2023
Listed Exchange: Not specified
On May 9th, Grayscale Investments announced the formation of Grayscale Funds Trust, a Delaware statutory trust structure, which includes three new funds: Grayscale Ethereum Futures ETF, Grayscale 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 1st.
The updated filing states that the Ethereum Futures ETF is an actively managed fund that primarily achieves its investment objective through holding Ethereum futures contracts purchased by its subsidiary based in the Cayman Islands.
The fund also plans to hold approximately 100% of its net assets in Ethereum futures contracts. However, it may also hold significant cash and cash equivalents investments, such as U.S. 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 U.S. Securities and Exchange Commission (SEC) filing, the proposed Direxion Bitcoin Ethereum Strategy ETF will invest in Bitcoin and Ethereum futures contracts, subject to regulatory approval. The ETF may also invest in other ETFs with exposure to futures products.
Founded in 1997, Direxion has a reputation 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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