Does Valkyrie have the inside track for the first ETF with ETH futures?
An SEC rule allows an existing fund amendment to go effective more quickly than new offerings — but that may not matter
Zephyr_p/Shutterstock modified by Blockworks
After fund groups rushed to file the latest plans for ETFs that would hold ETH futures contracts, Valkyrie took a slightly different approach, an apparent effort to get to market before the crowd.
Some industry watchers are not necessarily convinced.
Valkyrie is seeking to change the investment strategy of its existing bitcoin futures ETF to include ether futures contracts too — a move that could make it eligible to launch before competitors, if greenlit by the US Securities and Exchange Commission.
The Valkyrie Bitcoin Strategy ETF (BTF) “will change to pursue its investment objective through managed exposure to a combination of bitcoin futures contracts and ether futures contracts” on or around Oct. 3, an Aug. 4 filing notes.
The fund’s name would change to the Valkyrie Bitcoin and Ether Strategy ETF, the document adds, though its Nasdaq-listed ticker would stay the same.
Valkyrie declined to comment.
Various fund groups filed for a dozen or so ether-related ETFs last week after Volatility Shares made a move to do so on July 28. The latter firm’s proposed fund prospectus is dated Oct. 11 in the filing.
Read more: SEC now ready to consider ETH futures ETFs, sources say — but what’s changed?
While SEC Rule 485(a) allows a new open-end fund to “become effective” in as early as 75 days, a post-effective amendment of an existing open-end fund or investment trust can become effective in 60 days. Becoming effective, an SEC designation, doesn’t necessarily coincide directly with a fund’s launch date.
“The Valkyrie filing puts it ahead of others in terms of its proposed launch date, but I’m not sure the SEC would necessarily go in this order,” said Bryan Armour, director of passive strategies research at Morningstar.
Dave Nadig, a financial futurist at data firm VettaFi, told Blockworks that the SEC has no legal obligation to stay on anyone’s timeline.
“They can choose to rely on previous filing dates and stick to the schedule, or they could delay as long as they like,” Nadig said. “They could approve all [ether-related] ETFs on the same day, regardless of what deadline might have put someone first.”
He doesn’t expect the SEC to allow ether futures contracts to “slip” into one fund before approving the rest, Nadig said.
“I’m super skeptical that Valkyrie sneaks in,” he said.
Valkyrie seeks first-move advantage
Valkyrie was second to market with a US-traded bitcoin futures ETF, launching in October 2021 just days after the launch of the first — the ProShares Bitcoin Strategy ETF (BITO).
Nearly two years later, BITO’s first-mover advantage has been critical. While BITO has more than $1 billion in assets under management, Valkyrie’s competing fund has about $30 million.
ProShares has not publicly shared plans to change BITO’s strategy — filing instead for four ether-related ETFs last week, including two that would hold both BTC and ETH futures products.
Valkyrie’s move to amend an existing fund to launch the first such product in a certain segment has been done before, Bloomberg Intelligence analyst Eric Balchunas noted in a tweet.
ETF Managers Group converted a Latin American real estate ETF into the ETFMG Alternative Harvest ETF (MJ) as part of a “novel approach that made it first in line for marijuana ETFs in the US,” Armour noted — a move he called “somewhat comparable” to what Valkyrie is trying to do.
“It is worth pointing out that this could be the first ETF to offer ether futures, but investors may prefer an ether-only portfolio to one mixed with bitcoin futures,” Armour said.
Valkyrie had filed for an Ethereum Strategy ETF in May — when sources told Blockworks that the SEC was not ready to publicly consider such a product.
The firm is also one of many with a spot bitcoin ETF proposal being reviewed by the SEC.
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