After filing for a spot Bitcoin exchange-traded fund (ETF), Nashville-based asset manager Valkyrie has applied to the US Securities and Exchange Commission (SEC) for an Ethereum Futures ETF.

According to a Wednesday, August 16 filing, Valkyrie Ethereum Strategy ETF will not directly invest in Ether coin but will seek to purchase a number of ETH futures contracts and invest in other collateral investments. The fund will be traded on Chicago Mercantile Exchange (CME).

Valkyrie just filed for an Ether Futures ETF, which is in addition to their 497 filing to do name/strategy of $BTF to Bitcoin + Ether Futures to get out early. Perhaps this is sign SEC not letting them do the ‘ole $MJ maneuver, not sure.. ht @NateGeraci pic.twitter.com/OeyGuyJP3y

— Eric Balchunas (@EricBalchunas) August 16, 2023

The filing reads:

“The Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve its investment objective by investing all or substantially all of its assets in exchange-traded futures contracts on ether and “Collateral Investments” (as defined below). The Fund will not directly invest in ether. Under normal circumstances, the Fund will seek to purchase a number of ether futures contracts…”

The Race is on for ETH Futures ETFs

Per the filing with the SEC, Valkyrie Ethereum Strategt Futures ETF will invest in cash-settled Ether futures contracts on CME via “a wholly owned subsidiary of the Fund organized under the laws of the Cayman Islands,” and the price of Ether futures will be determined by reference to the CME CF Ether Reference Rate. The fund’s investment in Ether futures contracts will be limited to 8,000 contracts per month, which is the limit established by the CME for such contracts.

In addition to Ether futures, Valkyie ETF will direct its remaining assets to collateral investments. These investments will be made directly in “cash, cash-like instruments, or high-quality securities,” which include US Government securities, such as bills, notes, and bonds issued by the US Treasury, money market funds, and/or corporate debt securities, such as commercial paper and short-term unsecured promissory notes.

“In order to help maintain the desired level of exposure to Ether Futures Contracts, the Fund may enter into reverse repurchase agreements, a form of borrowing in which the Fund sells portfolio securities to financial institutions and agrees to repurchase them at a mutually agreed-upon date and price that is higher than the original sale price, and use the proceeds for investment purchases,” reads the filing.

With the latest filing, Valkyrie has joined six other asset managers waiting in line for Ether Futures ETF approval from the SEC. They include Grayscale, VanEck, Bitwise, Volatility Shares, ProShares, and Round Hill Capital. The firm already offers two Bitcoin-focused ETFs: Valkyrie Bitcoin Strategy ETF (BTF) and Valkyrie Bitcoin Miners ETF (WGMI). The firm has also applied for a spot Bitcoin ETF.

As the crypto market recovers from the wounds of 2022, there is a renewed interest in crypto ETFs. Besides spot Bitcoin ETF, the race is on for ETH futures ETF. Bloomberg ETF analyst Eric Balchunas noted higher chances of Ethereum Futures ETFs coming before a spot Bitcoin ETF. According to him, Voltality Shares’ Ether Futures ETF (ETHU) will be the first to hit the US markets by October 12, 2023.

VolatilityShares announcing they intend to list their Ether Futures ETF on Oct 12th (which would be a day or two ahead of the rest of pack (if the 75 days is adhered to).. they did same thing w $BITX pic.twitter.com/hhFtk32f4X

— Eric Balchunas (@EricBalchunas) August 15, 2023

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Filed under: News - @ August 17, 2023 4:19 am