Ether Futures ETFs - Rising Trend Amid SEC Reconsideration

Ether Futures ETFs: An Emerging Trend Among Asset Managers

In the fast-paced world of investment, asset managers are continually seeking out the next big opportunity. The latest trend appears to be Ether futures exchange-traded funds (ETFs). Many firms are making a beeline to file for this promising product, indicating a shift in the perspective of the US Securities and Exchange Commission (SEC).

The most recent company to submit a filing for such an ETF was Volatility Shares. Hot on their heels, Grayscale Investments, Bitwise, Roundhill Investments, ProShares, and VanEck have all joined the fray this week. Insiders suggest the SEC's readiness to publicly review these ETFs may hint at a potential approval in the future.

Ether Futures ETFs: A Turnaround for the SEC?

This willingness to consider ether futures ETFs represents a shift from the SEC's stance in May. At that time, sources revealed the US regulator advised firms to suspend their pursuits of such ETFs. Grayscale, for instance, had made plans to roll out an ether futures ETF. However, the firm quickly amended a filing suggesting they were abandoning their efforts. Similarly, Bitwise Asset Management, Direxion, and Roundhill Investments also withdrew their applications.

This decision to reconsider ether futures ETFs after several companies halted their plans has left many industry insiders baffled. Matthew Sigel, head of digital assets research at VanEck, characterized the SEC's policy on crypto ETFs as "haphazard" and "completely incoherent."

Crypto ETFs: An Inevitable Part of the Investment Landscape

Despite this confusion, some believe there's a growing acceptance at the SEC that cryptocurrency is becoming an irreplaceable part of the American investment landscape. Nate Geraci, president of The ETF Store, observed that the sentiment surrounding crypto-related ETFs has notably improved in recent months. He attributes this positivity to BlackRock's entry into the spot bitcoin ETF competition, and optimism surrounding Grayscale's lawsuit against the SEC.

Furthermore, Bloomberg Intelligence analysts James Seyffart and Eric Balchunas estimated the likelihood of a spot bitcoin ETF approval at 65%. In June, the SEC allowed the first leveraged bitcoin futures ETF to hit the market, launched by none other than Volatility Shares, the same firm that initiated this recent wave of ether futures ETF filings.

The Performance and Potential of Ether Futures ETFs

In October 2021, the SEC greenlit ETFs holding bitcoin futures contracts traded on the Chicago Mercantile Exchange (CME). The ProShares Bitcoin Strategy ETF (BITO), the first fund to launch under this approval, has significantly outperformed its competitors, with approximately $1 billion under its management.

According to Geraci, it seems "illogical" for the SEC to permit ETFs holding CME-traded bitcoin futures but not those holding CME-traded ether futures. However, given the historical unpredictability of these filings, it's hard to predict how the SEC will respond.

The Fresh Wave of Applications

Recently, six major asset managers, including Grayscale and VanEck, have submitted new applications to launch Ether futures ETFs to US customers. The filings reviewed by Cointelegraph show respective applications from Grayscale, VanEck, Bitwise, Volatility Shares, ProShares, and Round Hill Capital. Grayscale and Volatility Shares outlined plans for funds investing primarily in "front-month" Ether futures contracts, intending to roll Ether futures contracts before their expiry.

VanEck's Strategy and ProShares' Short Ether Strategy ETF

Meanwhile, VanEck's filing indicated a strategy to invest in ETH futures contracts, aiming for the value of ETH exposure to equal 100% of the total assets of the fund. Any changes in the value of ETH would result in larger changes to VanEck’s Ether ETF fund, including the possibility for greater losses if the fund's exposure to the value of ETH were not leveraged.

ProShares offered an overview of their Short Ether Strategy ETF, which will invest in daily contracts seeking to profit on the S&P CME Ether Futures index's losses. The ProShares fund would gain as much as the index loses on a given day, and vice versa.

The Deadline and The Watchdog's Decision

As the SEC reviews these approval requests, the verdicts are expected to be declared by mid-October 2023. Industry watchers are also eagerly awaiting Blackrock, the $9 trillion asset management giant, to join the club of the six Ether Futures ETF pioneers in the U.S.

The recent wave of filings suggests a sense of urgency among asset managers not to be left behind if ETH futures take off. However, despite this rush, approval remains far from guaranteed, underscoring the continued uncertainty in the regulatory landscape for crypto ETFs.
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