The U.S. Securities and Exchange Commission (SEC) has given the green light to the Volatility Shares 2x Bitcoin Strategy ETF (BITX), marking the first leveraged Bitcoin futures exchange-traded fund to be approved. The eagerly anticipated ETF is set to launch on the Chicago Board Options Exchange (CBOE) BZX Exchange on Tuesday, June 27.
BITX aims to deliver investment results that correspond to twice the return of the Chicago Mercantile Exchange (CME) Bitcoin Futures Daily Roll Index, according to the SEC filing. As an exchange-traded fund, BITX bundles securities, allowing investors to gain exposure to Bitcoin without direct ownership. Bitcoin ETFs generally come in two types: Bitcoin futures and Bitcoin spot.
However, some market observers have raised concerns about the performance of Bitcoin futures ETFs compared to Bitcoin itself. The U.S.’s first Bitcoin futures ETF, BITO, has reportedly underperformed Bitcoin year-to-date, although it did experience a surge in value against the USD following the news of BITX’s approval. Yahoo Finance reported that BITO gained 3.45% on the day, reaching $17.57, but it remains more than 50% below its all-time high of $43.32 in 2021. The ETF is designed to track the CME Bitcoin Futures Daily Roll Index, as stated in its prospectus filing.
The approval of BITX arrives at a time when the value of Bitcoin has been steadily rising, surpassing the $31,000 mark. Notably, several major traditional investment firms, including BlackRock, have recently applied for spot Bitcoin ETFs with the SEC. While futures-based ETF products have been available, the SEC has consistently blocked the launch of spot products. Additionally, other leveraged Bitcoin futures products have failed to secure the necessary approvals.
BITX, being a leveraged ETF, employs debt or financial derivatives, such as Bitcoin futures, to amplify the returns of a benchmark index. This leverage can generate short-term gains for investors but also carries the risk of substantial losses.
The news of the SEC’s approval has been generally well-received by cryptocurrency advocates across the market. However, it has also sparked questions and criticisms from some observers. Nate Geraci, co-founder of the ETF Institute, took to Twitter to express his thoughts, stating, “When we look back on the Bitcoin ETF saga in 5 or 10 years, this will be one of the most ridiculous aspects… A 2x leveraged futures product launching before a straightforward spot ETF. Wild.”
As the launch of the Volatility Shares 2x Bitcoin Strategy ETF approaches, market participants will closely monitor its performance and assess its impact on the cryptocurrency ecosystem. The approval of a leveraged Bitcoin futures ETF marks a significant milestone in the maturation and acceptance of digital assets within the traditional financial landscape.