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Global X is getting into the bitcoin futures ETF realm, but it’s aiming to give investors a long-term strategy for exposure to the asset class.
BITS takes a different approach to cryptocurrency exposure than XBTF and the older ProShares Bitcoin Strategy ETF (BITO) and Valkyrie Bitcoin Strategy ETF (BTF), which all seek to provide as close to the spot price of bitcoin as possible by holding near-month futures contracts.
Approximately half of BITS’ assets are to be allocated in companies the firm believes will benefit from adoption of blockchain technology, while the remaining half will be placed in long positions within the bitcoin futures market. The fund can invest up to 25% of its assets in a Cayman Islands subsidiary through which it will hold bitcoin futures.
The assets allocated to equity will be invested in the Global X Blockchain ETF (BKCH) upon launch.
Jay Jacobs, Global X’s head of research and strategy, said BITS’ flexibility as an actively managed fund will allow it to smooth out the issues analysts have warned of when BITO and BTF were launching.
Namely, placing assets in contracts further along the bitcoin futures curve should minimize the contango effect and reduce the roll costs associated with near-month futures vehicles. The fund will likely also benefit from not having to compete against three other ETF issuers all vying for the same set of contracts.
“By limiting that futures exposure to a smaller percentage of the fund, you start to solve some of the wonky issues with futures funds,” Jacobs said. “Capacity becomes less of an issue.”