With spot ether ETF fate uncertain, issuers seek leveraged ETH futures funds
ProShares, Volatility Shares and Defiance have filed for funds that would seek to offer leveraged exposure to ETH via futures contract investments
tanatpon13p/Shutterstock modified by Blockworks
While the outlook for spot ether ETFs remains murky in the near-term, issuers have acknowledged plans to launch other types of ETH funds.
ETF issuers Volatility Shares, ProShares and Defiance have filed plans in recent days to launch leveraged funds that would hold ether futures contracts.
Volatility Shares — the firm that last year pushed forward with its ether futures ETF proposal after others halted similar efforts — detailed plans to bring to market a 2x Ether Strategy ETF on April 5.
The fund seeks to benefit from increases in the price of ether futures contracts traded on the Chicago Mercantile Exchange (CME) to try to generate two times the performance of ETH, according to a Securities and Exchange Commission disclosure. It may also invest in swap agreement and reverse repurchase agreement transactions.
Read more: Volatility Shares not giving up on ETH futures ETF effort
Similarly, the ProShares Ultra Ether ETF would seek daily investment results that correspond to twice the daily performance of the Bloomberg Ethereum Index, according to a Monday filing.
The firm’s UltraShort Ether ETF would look for results in line with two times the inverse of the daily performance of that same benchmark.
Neither proposed fund invests in, or shorts, ether directly, the disclosure notes.
Instead, they would invest in cash-settled ether futures contracts traded on commodity exchanges registered with the Commodity Futures Trading Commission. The planned ProShares ETFs would also enter into swap agreements that provide exposure to ether.
Finally, a 2X Ether Strategy ETF by fund group Defiance seeks daily investment results that correspond to two times the return of the CF Rolling CME Ether Futures Index for a single day.
The fund’s disclosure notes that the proposed ETF is “riskier than alternatives that do not use leverage.”
Neena Mishra, director of ETF Research at Zacks Investment Research, told Blockworks she would not be surprised to see the leveraged ether ETFs approved before the launch of spot products.
The SEC is set to rule on spot ether funds in May, though some industry watchers have said the chance of approval by that time appears to be dwindling.
Read more: Ether ETFs coming in May? Here’s why many are bearish
The leveraged ether futures ETF filings come roughly six months after the launch of the first US ether futures funds in October. Such funds saw initial demand that some industry watchers described as underwhelming.
According to ETF.com, the combined assets under management (AUM) of the three pure ether futures ETFs by ProShares, VanEck and Bitwise amount to approximately $110 million. Among them, the ProShares fund is at the forefront with an AUM of around $70 million.
Mishra said she doesn’t expect the leveraged ether futures ETFs to attract much interest given the lukewarm demand for well-performing ETH futures funds.
“Investors are likely to wait for pure exposure to ether via spot ETFs rather than investing in futures-based products,” she added. Once those spot ETFs become available and gather a significant amount of assets, investors will then look for ways to hedge or amplify their returns using leveraged products.”
The leveraged bitcoin futures ETF by Volatility Shares has grown to nearly $1.6 billion since launching in June 2023. That asset base represents more than half that of the largest bitcoin futures ETF — ProShares’ Bitcoin Strategy ETF (BITO) — which manages about $2.8 billion.
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