SEC won’t approve Valkyrie’s leveraged bitcoin ETF
SEC won’t approve Valkyrie’s leveraged bitcoin ETF

SEC won’t approve Valkyrie’s leveraged bitcoin ETF

By Vincenzo Cacioppoli - 29 Oct 2021

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The SEC has reportedly asked the financial company Valkyrie to withdraw its application to list a new leveraged Bitcoin ETF.

The Wall Street Journal revealed this.

SEC won’t accept leveraged Bitcoin ETFs.

This decision comes two weeks after the approval of the first Bitcoin futures ETF by Proshares and ten days after the approval of a second Bitcoin futures ETF by Valkyrie itself.

The choice follows the indications given by the president of the SEC, Gary Gensler, who had stated to consider cryptocurrencies as security and therefore not to look favorably on leveraged financial instruments directly linked to cryptocurrency.

On the other hand, the SEC has a different view on financial products linked to Bitcoin futures already listed on the CME of Chicago. The SEC thinks that cryptocurrencies are highly risky products, and since they are not yet regulated, they are subject to possible frauds and scams.

Going back to the issue of Valkyrie’s ETF, the SEC’s request is considered a courtesy done to the company. Valkyrie could wait for the commission’s decision within 75 days. But it seems implied that this response is unlikely to be in the affirmative.

SEC won’t approve Valkyrie’s leveraged bitcoin ETF

Bitcoin ETFs

There would currently be about twenty ETFs awaiting approval by the SEC, at least half of which are tied directly to the underlying Bitcoin.

The SEC’s cautious attitude towards these highly speculative funds is also due to the significant losses suffered by these financial instruments in the last two years. And it’s clear that an ETF on an extremely volatile currency like Bitcoin could have even greater risk factors for hypothetical investors.

Speaking of ETFs, SEC Chairman Gary Gensler recently said:

“This ETF can pose risks even to sophisticated investors, and can potentially create systemwide risks by operating in unanticipated ways when markets experience volatility or stress conditions.”

Simply put, ETFs (Exchange Traded Funds) are so-called passively managed investment funds. When you buy an ETF, you invest in a basket of securities or a stock index. The performance of the security depends on the performance of the instruments in which it invests.

Institutions want Bitcoin ETFs

However, the demand for these products seems to be very high if you think that the first listed Proshares Bitcoin ETF raised almost $1 billion in just one day.

That is because, according to analysts, these instruments allow institutional investors to invest in cryptocurrencies without having to buy the cryptocurrency itself, something that many institutional funds are not yet permitted by statute, being precisely instruments that are not yet fully regulated.

Vincenzo Cacioppoli

Vincenzo was born in Genova but lived most of his life in Milan. He has a degree in political science. He is a journalist, blogger, writer, and marketing and digital advertising expert. After a long experience in traditional marketing, he started working with the web and digital advertising in 2011, creating a company called Le enfants. Passionate about the web and innovation, in 2018 he started exploring the topics related to blockchain technology and cryptocurrencies. Independent cryptocurrency trader since March 2018, he now collaborates with companies in the sector as a content marketing specialist. In his blog., he has long been primarily focused on blockchain, which he considers to be the greatest technological innovation after the Internet. His first book about blockchain and fintech is scheduled for release in November.

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