First leveraged Bitcoin ETF in the US quietly opens, with a first-day trading volume of nearly $5.5 million.

The first leveraged Bitcoin ETF is now available in the US, and it had a first-day trading volume of almost $5.5 million.

On June 27, the first leveraged Bitcoin ETF (stock code: BITX) in the United States began trading on the CBOE BZX exchange.

According to Volatility Shares, BITX is a 2x Bitcoin strategy ETF that does not directly hold Bitcoin. It is usually equivalent to twice the daily performance of the S&P CME Bitcoin Futures Rolling Index (stock code: SPBTFDUE), seeking to benefit from the daily price increase of Bitcoin futures contracts. The management fee of this ETF is 1.85%, much higher than the 0.95% charged by the first Bitcoin futures ETF BITO in the United States.

Volatility Shares said in a statement: “Now, US cryptocurrency traders will be able to conveniently and liquidly obtain leveraged Bitcoin exposure through traditional brokerage accounts, without the need for cryptocurrency trading accounts during this period of legal uncertainty on such platforms.”

According to Bloomberg data, trading volume on BITX was about $500,000 in the first 15 minutes of its launch, and the first-day transaction volume was about $5.5 million, making it one of the products with the highest first-day trading volume among ETFs launched this year.

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Volatility Shares, based in Florida, was founded in 2019 and is known for its leveraged and inverse ETFs. It also has three fund products, namely: 2x Long VIX Futures ETF (UVIX), -1x Short VIX Futures ETF (SVIX), and -1x Short VIX Mid-Term Futures Strategy ETF (ZIVB), with a total scale of US$160 million.

SEC relaxes?

Previously reported, the SEC allowed Bitcoin futures ETFs to be listed in October 2021. The first ETF asset launched by ProShares quickly grew to US$1 billion, and its asset management scale still maintains at this level.

The launch of BITX coincides with BlackRock’s submission of a spot Bitcoin ETF to the SEC. Considering the status of the asset management company and its almost perfect approval history, some market observers believe that this may be a potential good sign for such products to be approved by regulatory agencies.

Bloomberg News ETF analysts James Seyffart and Eric Balchunas said in a tweet that the willingness of the US Securities and Exchange Commission to allow leveraged Bitcoin futures ETFs may signal that Bitcoin products “see hope”.

In a tweet, Balchunas also speculated that the approval may be an “early sign of the SEC easing its guard,” perhaps in consideration of future types of Bitcoin ETFs.

Nonetheless, some institutional investors have already withdrawn their applications. Direxion and ProShares respectively withdrew their 2x Bitcoin futures applications on June 1st and 7th, and Valkyrie’s leveraged BTC futures ETF was asked to withdraw by the SEC three days after submission in October 2021.

James Butterfill, research head at CoinShares, analyzed that CME’s oversight of Bitcoin futures contracts was a “key reason” for the approval of the Volatility Shares proposal. The SEC’s main hesitation in approving a spot Bitcoin ETF is whether the spot exchange is subject to adequate regulation. Butterfill said, “If BlackRock can meet the regulatory requirements for adequate supervision of spot exchanges, a spot ETF is likely to be approved.” “In any case, I expect the approval process to take some time.”

Todd Rosenbluth, research head at VettaFi, said, “Bitcoin’s strong rebound this year has rekindled investor interest. While there are existing futures-based ETFs, some investors may be willing to take on additional risk for higher returns.”

Mounting Concerns

Most Bitcoin supporters in the market welcome the launch of BITX, but there are also some voices of opposition. Some industry insiders believe that approving leveraged futures ETFs before simple spot ETFs makes no sense from the perspective of investor protection.

Leveraged funds use debt or financial derivatives (Bitcoin futures in BITX) as leverage to amplify returns on benchmark indices. This leverage may mean short-term gains for investors, but it can also lead to massive losses. Due to their high-risk, high-cost nature, leveraged ETFs are rarely used for long-term investing.

One Twitter user quipped, “Yes, 2x Bitcoin futures really protect investors.” Nate Geraci, co-founder of the ETF Institute, tweeted, “This will be one of the most absurd chapters in the Bitcoin ETF story in 5 to 10 years… launching a 2x leveraged futures product before a simple spot ETF is wild.”

The first Bitcoin futures ETF in the United States, BITO, is still lagging behind BTC this year. Market data shows that the asset rose 3.45% on Tuesday to $17.57. However, compared to the historical high of $43.32 in 2021, it has still fallen by more than 50%.

Dave Nadig, a financial analyst at data company VettaFi, expressed skepticism about the launch of spot Bitcoin. He said: “In fact, if they really launch, I doubt their lifespan will be short and only used for the narrowest retail use cases.”

Author: BlockingBitpushNews Mary Liu

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