The crypto ETFs that could launch before a US spot bitcoin fund

Other crypto funds appear more likely to start trading in the near term as the Securities and Exchange Commission mulls a range of spot bitcoin ETFs.

These include ETFs that hold ether futures contracts and those that offer a twist on bitcoin futures offerings on the market since 2021.

Though many industry watchers await an SEC ruling on planned spot bitcoin funds from BlackRock, Fidelity and others, the regulator said last week it needed more time to consider seven such proposals.

That followed an Aug. 11 filing in which the SEC said it could take at least another 45 days to mull over a spot bitcoin ETF from Ark Invest and 21Shares.

The SEC’s final deadline to rule on the proposed Ark 21Shares Bitcoin ETF is Jan. 10. It would have to decide on most others — aside from Global X’s planned product, which was filed later on — by March.

After Grayscale Investments won a lawsuit against the SEC last week, Bloomberg Intelligence analysts said they had upped their chances of a bitcoin ETF launch in 2023 from 65% to 75%. They pegged the chance for such a bitcoin offering to come to market by the end of 2024 at 95%.

But other crypto ETFs — albeit ones that don’t hold bitcoin directly — appear to have clearer paths to launch as early as October.

Ether futures ETFs

The first ether futures ETF could launch next month, marking two years to the month after the first bitcoin futures ETFs launched.

Volatility Shares filed for a fund that would hold ether futures contracts on July 28. Other issuers, such as Grayscale Investments, Bitwise and ProShares, followed suit the following week.

Those proposals came after several firms who applied for such products quickly halted those plans. Sources say the SEC had asked them to retreat on the efforts.

Two sources familiar with the latest ether futures ETF filings told Blockworks in August the SEC had indicated its readiness to publicly consider that type of fund. Bloomberg reported later that month the SEC isn’t likely to block the products, citing people familiar with the matter.

The regulator has declined to comment on the subject.

Fund group Valkyrie proposed in an Aug. 4 filing to change its bitcoin futures ETF to one that also holds ether futures — an adjustment that could go into effect, if not blocked by the SEC, on or around Oct. 3.

Bitwise, a few days after Valkyrie, took a similar approach and proposed converting its Bitcoin Strategy Optimum Roll ETF (BITC) into the Bitwise Bitcoin and Ethereum Equal Weight Strategy ETF. That fund, which would also hold both bitcoin and ether futures, could become effective on Oct. 9, the filing notes.

Volatility Shares said last month it planned to launch its Ether Strategy ETF (ETHU) on Oct. 12.

“Volatility Shares successfully launched the first 2x bitcoin-linked ETF (BITX) in July and believes ETHU is the next logical next step before turning our focus to the spot markets,” firm Chief Investment Officer Stuart Barton said in a statement at the time.

This is good work. Think the first ETF holding ETH futures will be @ValkyrieFunds' $BTF. So it will be Bitcoin and Ethereum futures. @BitwiseInvest will do same. Then on/around Oct 12 Volatility shares and potentially other issuers will launch the first pure Eth Futures ETFs.

— James Seyffart (@JSeyff) August 18, 2023

Bitwise Chief Investment Officer Matt Hougan told CoinDeskTV in August that he expects a decision on ETH futures ETFs before a decision on spot bitcoin ETFs.

“I know people’s perception is that the SEC has just been a no on [crypto] ETFs,” he added. “It’s actually just been slow on ETFs. But that regulatory logjam is now breaking up, and I think that’s very exciting for investors.”

Other crypto funds on deck

Ark Invest and 21Shares wait to see if their spot bitcoin ETF will be approved, as well as their proposed funds that would invest in ether futures.

But the firms are also sub-advisers for applied-for products that appear poised to launch without contest, as they combine elements of already approved funds. Seventy-five days after the Aug. 11 filing, at which point it is proposed the funds go effective, would be Oct. 25.

All three would hold bitcoin futures contracts or ETFs that hold such investments, with one combining those exposures with equities of companies across the blockchain, digital asset and fintech industries.

Meanwhile, Global X looks to launch a so-called Bitcoin Trend Strategy ETF, a fund which “systematically and dynamically allocates between” bitcoin futures contracts and the Global X 1-3 Month T-Bill ETF (CLIP), according to a July 20 filing. The proposal intends to go effective 75 days after the filing, set to be on or around Oct. 3.

Bryan Armour, a director of passive strategies at Morningstar, told Blockworks in July that it could be a long time before the SEC approves a spot bitcoin ETF.

“So Global X appears to be offering something for bitcoin-enthused investors to add to their portfolio in the meantime,” he added.