Long and Short Bitcoin ETFs Filed with SEC
Two more bitcoin ETFs have been filed with the U.S. Securities and Exchange Commission (SEC). “Rex Bitcoin Strategy ETF” and “Rex Short Bitcoin Strategy ETF” are not expected to invest directly in bitcoin. Their investments will include US-listed bitcoin derivatives as well as “an actively managed portfolio of fixed income instruments.”
Bitcoin ETFs Without Bitcoin
Two bitcoin exchange-traded funds (ETFs) were filed with the SEC on August 23; Rex Bitcoin Strategy ETF and Rex Short Bitcoin Strategy ETF. The former seeks to provide investors with “long exposure” to the price movements of bitcoin, whereas the latter with “short exposure.” The ticker symbols and expense ratios were not disclosed. According to the filing:
The funds are actively managed and are not expected to invest directly in bitcoin. As such, the funds can be expected to perform differently from the performance of the bitcoin.
Founded in 2014, Rex Shares LLC is the sponsor of the funds. Prior to the filing, the company announced the formation of a wholly-owned subsidiary called Rex Capital Management LLC on August 21. Its focus is to develop investment products and strategies related to bitcoin and other digital assets. Rex Capital Management will act as the advisor to the funds.
‘Long’ and ‘Short’ Bitcoin ETFs
The Rex Bitcoin Strategy ETF’s specific SEC filing states that “the fund does not expect to invest directly in bitcoin.” Instead, the fund will invest in “financial instruments that provide exposure to the price movements of bitcoin, including futures contracts linked to the price of bitcoin or an index thereof and that are traded and/or listed in the United States (‘Bitcoin Futures’).” In addition:
The fund seeks to achieve its investment objective, under normal circumstances, by investing directly and indirectly in an actively managed portfolio of financial instruments providing long exposure to movements in the value of bitcoin, together with an actively managed portfolio of fixed income instruments.
It will gain significant exposure to bitcoin instruments, the filing claims, by investing up to 25% of its total assets in a wholly-owned Cayman Islands subsidiary. The subsidiary will invest in long positions in Bitcoin Futures and will periodically sell them to unwind a portion of its positions. In addition, “the fund expects the notional value of its exposure to bitcoin to be equal to approximately 100% of fund assets at the close of each trading day.”
Meanwhile, the short bitcoin ETF seeks to achieve its investment objective by “providing short exposure to movements in the value of bitcoin,” in a similar manner to its long counterpart.
Fund Managers Increasingly File for Bitcoin ETFs
The Rex Bitcoin ETF filings follow the Vaneck Vectors Bitcoin Strategy ETF, which was filed with the SEC by investment management firm Vaneck last week. News.Bitcoin.com recently reported on the filing. Expected to list on the Nasdaq Stock Market, the Vaneck’s bitcoin ETF also does not hold any actual bitcoin, but will invest up to 25% of its value in U.S. exchange-traded bitcoin derivative instruments.
The SEC is also currently considering Barry Silbert’s Bitcoin Investment Trust and Coin ETF. The former is set to be decided on by October 7. The latter is under review after Bats BZX Exchange filed a petition to reverse the Commission’s decision to reject it in March.
What do you think of these fund managers launching bitcoin ETFs but not investing in bitcoin? Also, do you think the SEC will approve them? Let us know in the comments section below.
Images courtesy of Shutterstock and Rex Shares LLC
Need to calculate your bitcoin holdings? Check our tools section.