A recent filing from VanEck outlines plans for an actively managed ETF that will invest in bitcoin-linked vehicles. The prospectus for the VanEck Vectors Bitcoin Strategy ETF does not indicate that the fund will ever simply hold bitcoins.
The prospectus also included an explanation of how the bitcoin concept works. Essentially, bitcoins are “mined” by computers in the bitcoin network by miners who all compete to solve the same math problem using those computers.
Those same computers in the Bitcoin network also record bitcoin transactions and add them to the “blockchain,” which is a permanent and unalterable record of all bitcoin transactions and balances. To enter the bitcoin economy, a would-be user must set up a bitcoin wallet using specialized software, which enables the user to send and receive bitcoins and store them securely.
The main appeal of bitcoin is that it is entirely unregulated by any government, which ironically is what has prevented investment products based on the concept from being launched. However, there are exchange-traded notes that are currently trading in Sweden.
Bitcoin Investment Vehicles
Currently, there are no bitcoin vehicles trading on exchanges in the U.S., but bitcoin options to be launched by LedgerX were already approved by the U.S. Commodity Futures Trading Commission and could launch this year.
More recently, ETF.com’s parent company CBOE has entered into an agreement with Gemini Trust to create futures based on Gemini’s bitcoin data. Gemini is a bitcoin exchange owned by Cameron and Tyler Winklevoss, who earlier this year saw their application for a bitcoin ETF, the Winklevoss Bitcoin Trust (COIN), rejected by the SEC. Like the options, the futures could launch this year.
The proposed VanEck ETF will invest in bitcoin instruments via a Cayman Islands-domiciled subsidiary, which will comprise no more than 25% of the total portfolio. The remainder of the portfolio will be invested in fixed-income vehicles such as U.S. Treasurys, money market funds and cash or cash equivalents, according to the prospectus.
The fund is slated to list on the Nasdaq exchange. The filing did not include an expense ratio or ticker.
Contact Heather Bell at [email protected]