News came out yesterday about ETFs based on futures contracts on the price of ETH (Ethereum).
Although ETFs on ETH futures already exist in the market, including in the US, yesterday’s remains a first in the country.
Summary
The Valkyrie Bitcoin Strategy ETF (BTF)
The novelty concerns the Valkyrie Bitcoin Strategy ETF, listed on Nasdaq under the ticker BTF.
BTF is not the classic ETF that merely replicates the price trend of Bitcoin, but is an actively managed fund largely collateralized in BTC price futures contracts.
It was launched in 2021, and has net assets worth more than $24 million in total.
What’s new is that the SEC has now approved the addition of ETH futures to the fund, so as to make it the first ETF in the U.S. markets to allow simultaneous dual exposure to BTC and ETH.
In fact, the fund manager, Valkyrie Funds, has begun buying Ethereum price futures contracts and adding them as collateral to the BTF ETF.
On Monday, the new version of the fund, which will change its name to Valkyrie Bitcoin and Ether Strategy ETF, and assume the ticker BTF.O, will be launched in the markets.
In addition to the Valkyrie hybrid ETF, there are also other companies preparing to launch ETH futures-based ETFs in the U.S. market, including VanEck and ProShares.
News on Futures ETF: the effect on ETH’s price
The news broke yesterday, but it does not appear to have had any significant impact on the price of Ethereum.
In fact, although this actually rose by 4 percent, it did not really do anything more than follow the rise in the price of Bitcoin, which meanwhile was clocking +4.1 percent.
However over the past few hours the price of BTC has fallen slightly, bringing the cumulative gain since yesterday to +3%, while ETH’s gain has remained at +4%.
So the news did not cause ETH’s price to rise, but allowed it to hold up better.
Note that the current market value of about $1,650 is perfectly in line with that of 30 days ago, while in the same period the price of BTC has been +3.7%.
In other words, in the past weeks ETH had grown less, so it stands to reason that now it will instead recover a bit.
One should not forget that ETHs based on futures contracts have no real impact on the price of the underlying, because they are not collateralized directly in the underlying to the futures contracts, but only with the contracts themselves.
The other ETFs
Now therefore there are already available in the U.S. markets both ETFs that replicate the price movement of BTC and ETFs that allow simultaneous dual exposure to BTC and ETH. Also coming soon, probably, are those that replicate the price trend of ETH.
A separate issue, however, is that of ETFs collateralized directly in BTC and ETH, which instead could have an impact on the price of the underlying if highly demanded by the market.
The assumption is that by now the SEC no longer has any excuse not to approve them, although it will probably take all the time available by delaying approval at most. Either way, the time limit is expected to expire in early 2024.
Should these spot BTC ETFs be approved, and be successful, they could cause the supply of Bitcoin on exchanges to shrink, contributing to the possible rise in price.
As far as spot ETH ETFs are concerned, there is no news on this yet, but should those on BTC be approved, it is to be expected that they will later approve those on ETH as well.
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