Volatility Shares Trust has submitted a filing to launch a Bitcoin Exchange Traded Fund (ETF) on the Cboe. According to the document, the Bitcoin ETF utilizes leverage to drive daily returns.
The 2x Bitcoin Strategy ETF aims to accomplish the following strategy:
“2x Bitcoin Strategy ETF seeks daily investment results, before fees and expenses, that correspond to two times (2x) the return of the S&P CME Bitcoin Futures Daily Roll Index for a single day, not for any other period. A “single day” is measured from the time the Fund calculates its net asset value (“NAV”) to the time of the Fund’s next NAV calculation. The return of the Fund for periods longer than a single day will be the result of its return for each day compounded over the period. The Fund’s returns for periods longer than a single day will very likely differ in amount, and possibly even direction, from the Fund’s stated multiple (2x) times the return of the Index for the same period. For periods longer than a single day, the Fund will lose money if the Index’s performance is flat, and it is possible that the Fund will lose money even if the level of the Index increases. Longer holding periods, higher Index volatility, and greater leveraged exposure each exacerbate the impact of compounding on an investor’s returns. During periods of higher Index volatility, the volatility of the Index may affect the Fund’s return as much as or more than the return of the Index.”
The document notes that the Fund is not suitable for investors who do not understand the strategy and the risk involved.
The Fund will enter into cash-settled BTC futures to generate the 2X returns. To maintain its 2x daily exposure to the Index, the Fund intends to exit its futures contracts as they near expiration and replace them with new futures contracts with a later expiration date.
As an asset, Bitcoin is well known for its high degree of volatility in either direction. Currently, Bitcoin has been rising in value do to renewed interest by big financial firms in launching more Bitcoin ETFs, along with an expectation it will soon have a more clearly defined compliance structure. Recently, Blackrock, the world’s largest asset manager, filed to launch a Bitcoin ETF – a product that has yet to be approved by the Securities and Exchange Commission. The Cboe, on the other hand, has allowed Bitcoin futures to trade for some time.
The SEC filing is available here.
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