The SEC gave a big present to crypto ETF firms late last week ahead of the government shutdown that appeared inevitable, reportedly granting approval for a number of ethereum futures strategies that could start trading soon.
First on its list appears to be Valkyrie Funds, which had filed with the regulator to add ethereum futures to its existing Bitcoin Strategy ETF. Another firm, VanEck, announced Thursday that it would soon launch its Ethereum Futures ETF, declining to give a precise date. And according to reporting by Reuters, the biggest bitcoin futures ETF shop, ProShares, was also granted approval. That firm similarly announced on its site that its three ETFs featuring ethereum futures would be available soon.
The development, much as any previous indications that the SEC might be moving forward with approval of crypto-themed funds, led to a mass of additional filings for products. Other firms that essentially got in line for approval by the SEC include Kelly ETFs and Bitwise.
But the apparent approvals of ethereum futures ETF followed news that likely upset crypto fund proponents, with the SEC indicating a further delay in approving spot bitcoin products. Since Grayscale Investments' recent court win over the SEC’s denial of its application, there has been mounting pressure on the agency to begin approving spot bitcoin ETFs.
“The SEC has been clearing their desks ahead of the possible government shutdown, which means issuing delays for spot bitcoin ETF filings while likely allowing ether future ETFs to potentially begin trading early next week,” Roxanna Islam, head of sector and industry research at VettaFi, said in an email. “It’s likely that these products will be accelerated to launch sooner than later before the government shutdown occurs.”
That shutdown was temporarily averted on Saturday, with Congress approving a spending bill that will continue to keep the government open for 45 days.
On Friday, Valkyrie filed an update with the SEC in which it appeared to back away from an immediate launch of an ethereum futures strategy within its bitcoin ETF.
"Effectively immediately, the fund will not purchase ether futures contracts until the effectiveness of an amendment to the fund’s registration statement contemplating the addition of ether futures contracts to the principal investment strategy of the fund. Until such time, the fund will unwind any existing positions in ether futures contracts," the company stated.
While the approvals are a step forward for crypto ETF providers, it's only a minor development compared with the eventual launch of spot products, demand for which is expected to quickly eclipse that of crypto futures ETFs.
Although there has been significant interest in the biggest bitcoin futures ETF, the $952 million ProShares Bitcoin Strategy ETF, advisors who want crypto funds are waiting for spot products, said Tyrone Ross, CEO and co-founder of Turnqey Labs.
“Financial advisors have no interest in futures ETFs. Most advisors want a spot bitcoin or spot ethereum ETF,” Ross said. “As far as advisors go, it’s a miss.”
There could be demand among retail investors and hedge funds, but the complicated nature of futures products, on top of the crypto asset class that many people do not understand, make them a tough sell to advisors, he said.
“Crypto is hard enough. But now I have to explain a crypto futures product?” Ross said, adding that the fees for the products can also be discouraging. “From a compliance standpoint, it’s going to be hard to get a futures product [approved].”
Ross is not a fan of ETFs for crypto in any form, but said that the “broader wealth management space is a little giddy” as the ethereum futures ETF approvals “means more pressure is being put on [SEC Chair] Gary Gensler and that we are closer to approval of a spot ETF.”
Given that anyone who wants to hold ethereum can do so through a U.S. exchange, the futures ETFs approval “is kind of a nothingburger,” said Mike Alfred, whose hedge fund Alpine Fox focuses on bitcoin and bitcoin-related equities.
“It may be bullish for ethereum traders in the short term,” as the approvals mean another avenue of quasi access to it, he said.
Spot products will offer lower fees compared with those of futures products, Alfred said.
“The real embedded cost of owning a futures product is a lot higher,” he said. “And the risk of underperforming the actual asset is high.”
For example, while the price of bitcoin has increased by 62% so far this year, the ProShares Bitcoin Strategy ETF has returned less than 32%.
“I don’t think an ethereum futures [ETF] approval is much of a watershed moment,” Alfred said. “If anything, it shows how backwards-thinking the SEC is on this.”
Editor's note: This story was updated to reflect the temporary spending bill passed on Saturday by Congress.
A new survey finds that many women prioritize financial security but continue to leave savings in accounts that may not keep pace with inflation.
Roundhill, Bitwise and GraniteShares funds remain on hold while the agency weighs how novel ETFs should be regulated.
"Shares of alternative assets managers have lagged this year as investors grow wary of private-credit exposure."
The fintech platform is touting a new AI-free Planning Observations feature, which draws on IRS tax records to uncover opportunities for advisors.
The Omaha, Nebraska-based RIA's latest acquisition expands its Rocky Mountain footprint after two prior Colorado deals last year.
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.
