Valkyrie Seeks to Modify Bitcoin ETF, Add Ether Investment

Valkyrie Funds, which runs a pair of bitcoin ETFs, is seeking to modify one of them to include exposure to ether futures contracts. 

Converting the Valkyrie Bitcoin Strategy ETF (BTF), to include investments in ether, the second largest cryptocurrency after bitcoin, may give the firm an advantage over the 13 recent filings seeking permission to create an ether ETF. 

Valkyrie filed to convert BTF in a 497 form with the SEC. The fund tracks bitcoin futures contracts and has about $30 million in assets, according to etf.com data. The filing says the company aims to convert the fund to the Valkyrie Bitcoin and Ether Strategy ETF on or around Oct. 3. 

That’s about a week ahead of the Oct. 11 date when Volatility Shares hopes to launch its own ether futures fund. Volatility filed on July 28 with the SEC for permission to launch the fund.  

Company officials see higher demand for a joint bitcoin and ether futures ETF rather than for a fund dedicated to one or the other, Chief Investment Officer Steven McClurg said:  

“A conversion does get you to market faster over a new filing, but we still believe that the product that the market wants is a combination of the two as opposed to a standalone.” 

As investors await the SEC’s decision on both a spot bitcoin ETF and ether futures ETF, firms are jockeying to be first, and converting an existing ETF may be faster than filing fresh. The SEC requires a minimum of 75 days before the launch of a new fund, whereas the time period is only about 60 days for a conversion, according to McClurg.  

The first firm to successfully launch will gain the vast majority of the “first mover” benefits, Morningstar analyst Bryan Armour recently told etf.com.  

Bitcoin ETF Race 

While the SEC has allowed bitcoin futures ETFs, the regulatory body has not approved any ETF applications that track ether futures contracts, which started trading in January 2021. Ether, the currency that operates on the ethereum blockchain platform, is treated as a commodity and not a security. 

After Volatility Shares’ July 28 ether filing, a slew of firms quickly followed including Bitwise Asset Mangement Inc., VanEck Funds and Grayscale Investments.  

Valkyrie, along with Grayscale, Bitwise and others, applied for an ether futures ETF in May, but quickly withdrew. The agency reportedly told firms to withdraw, but the SEC is now ready to consider the ether futures applications, according to recent Wall Street Journal reporting.  

Because Valkyrie’s proposed launch date is earlier doesn’t mean the SEC will approve any of the filings, or that the filings will necessarily be approved in any specific order, Armour said: “The remaining headwinds facing ether futures ETFs still apply to this fund.”  

Contact Lucy Brewster at [email protected].