Will the SEC approve “short” Bitcoin ETFs? There is a risk that it may fall to zero

The U.S. Securities and Exchange Commission (SEC) received two more applications for a BTC ETF on Thursday. However, they are different in nature from the previous ones, which concerned either the traditional spot ETF or the ETF associated with BTC futures contracts.

Direxion wants to shorten BTC

The first application came from Direxion, which filed an application with the SEC on October 26 for Direxion BTC Strategy Bear ETF. Like other futures products, it will not invest directly in BTC, but will instead manage managed positions on “short position” contracts, ie short on BTC issued on the Chicago Mercantile Exchange, or Chicago’s CME.

Simply put, if this ETF were approved by the SEC, investing in it would bet that the price of BTC would fall in the future. So it would be a kind of “inverse” ETF on BTC. However, Direxion curiously points out that this is a very risky tool. “The value of investing in this fund could fall sharply and without warning, even to zero. You should be prepared to lose your entire investment. ”

INVERSE BTC ETF: Direxion just filed for a -1x BTC Futures ETF, which will seek to be short front month BTC futures, basically the $ XIV of $ BITO.. This comes mere hours after the first levered BTC ETF was filed. pic.twitter.com/bN2m7pIZw5

– Eric Balchunas (@EricBalchunas) October 26, 2021

BTC ETF on lever?

Another application for the SEC came from Valkyrie, whose first BTC Futures ETF began trading on the NASDAQ stock exchange on Friday. However, Valkyrie also wants to get approval for BTC futures ETFs leverage effect 1.25 times the exposure to the asset. If they got approval, he would trade under a ticker BTFX.

1.25x? What is this? Leverage for ants?

– Vandelay ₿TC Industries (@VandelayBTC) October 26, 2021

Do they have a chance to get permission?

It is not at all unrealistic to allow an inverse BTC Futures ETF or a leveraged Futures ETF according to Nate Geraci of the ETF Store. ,, The SEC has already blessed the BTC Futures ETF from a regulatory perspective. If these leverage and inversion products exist in other markets, there is no reason for them not to exist here as well. “ said.

Geraci even believes that permits for leveraged BTC futures ETFs or “short” futures ETFs are likely to come before the SEC grants permits for the first pure spot BTC ETFs, which are the most sought after and are the only direct exposure to the price of BTC.