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The Valkyrie Bitcoin Strategy ETF, the second Bitcoin futures based fund approved for the US market, started trading on Friday 22 October on the NASDAQ under the symbol BTF.
The Valkyrie Bitcoin Strategy ETF will own Bitcoin futures contracts rather than the actual coin itself. This means it tries to track Bitcoin price fluctuations rather than purchasing the actual asset.
Valkyrie Funds CEO Leah Wald told Bloomberg the regulation of futures in the US might provide some greater sense of security to investors over buying the actual asset. The company has applied for approval of an ETF backed by Bitcoin itself, she said, but does not expect that until possibly next year.
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Launched on 22 October 2021 by alternative asset management firm Valkyrie and headed by Leah Wald, the Valkyrie Bitcoin Strategy ETF (BTF) seeks to provide investors with capital appreciation through exposure to Bitcoin futures.
The crypto-native fund manager is set to become the third sponsor of a Bitcoin futures ETF in the US.
This means investors will not directly own the underlying asset, but instead they will be exposed to future contracts. This means the price of the ETF will increase as the value of Bitcoin rises and the inverse occurs if the price of Bitcoin should fall.
The ETF, which originally filled in August, noted management fees for the fund will be 0.95%, which is the same fee as the ProShares ETF that also tracks futures contracts.
Valkyrie's launch follows the highly successful ProShares debut several days prior, which set history by becoming the first Bitcoin-related ETF to be approved by the SEC. ProShares continued to break records on its first 2 days of trading, becoming the fastest ETF fund to hit US$1 billion in assets under management.
Valkyrie's launch day was marred by a declining Bitcoin price, causing the ETF to open at US$25.50 and close 4% down at US$24.
Founder & CEO at Monochrome Asset Management
For everyday investors, accumulating physical Bitcoin comes with added hurdles of custody and operational risks.
"Bitcoin as a technology is battle-tested, but there is an inherent operator's risk when self-acquiring, holding and managing a bitcoin position even for the most experienced digital native, hence there's a market for those who prefer a safe pair of hands to manage their investment in exchange for a small management fee.
"Investing in a Bitcoin ETF offers investors the benefits of a safe yet low barrier to diversifying their portfolio into the asset class since it's a well understood financial product for most investors."
The Valkyrie ETF is not as simple as investing in Bitcoin via an ETF. It tracks Bitcoin futures contracts, which makes it a bit more complex than an ETF that just tracks the price of Bitcoin. As Valkyrie itself says on the product page "investors seeking direct exposure to the price of Bitcoin should consider another investment" (such as a cryptocurrency exchange or broker).
Remember that Bitcoin futures contracts are derivatives, which allow buyers and sellers to speculate on what the price of Bitcoin will be by a given date. In the case of BTF, it tracks BTC futures traded on the Chicago Mercantile Exchange (CME).
With that in mind, according to the prospectus, this is how the Valkyrie ETF works:
This means BTF may be suited to you if you want exposure to the volatility of Bitcoin markets, via the use of futures contracts, without wanting to actually trade them yourself.
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