Valkyrie Investments first to offer ether futures through ETF

Valkyrie Investments has won the race to offer the first exchange-traded fund featuring ethereum futures, a key development in the mainstreaming of digital assets in the U.S., FOX Business has learned.

The Nashville-based asset manager is the first of nine issuers to win approval from the Securities and Exchange Commission to give investors the opportunity to bet on the future price of the world's second-largest digital asset through a so-called ETF. Ether is the native token of the ethereum blockchain, and at the time of publication is worth around $1,650 per token.

Valkyrie is known for its Bitcoin Mining ETF, which is currently the top-performing crypto-related ETF in the U.S.

Investors, of course, can buy actual digital tokens from crypto exchanges like Coinbase, but the creation of ETFs is seen as a way to increase retail participation in crypto, since they are traded on big exchanges such as the Nasdaq and the New York Stock Exchange. The SEC has permitted trading of bitcoin ETFs that are priced off futures contracts since October 2021. Only a handful of firms are looking to delve further into digital asset investing by offering ether derivatives.

In addition to Valkyrie, eight other issuers have filed applications to launch ether ETF products, including VanEck, Grayscale Investments and Bitwise.

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Some of these firms, as well as Wall Street giants BlackRock and Fidelity, are looking to go one step further by launching a spot Bitcoin ETF. That would give a wide range of investors access to Bitcoin's spot price rather than its future value, which can only be purchased by so-called accredited investors who have significant investable assets. Three firms have also filed to launch spot ether ETFs.

Wall Street’s top cop has so far been reluctant to approve any kind of spot ETF, as it would mean inviting cryptocurrency further into the mainstream, something Chairman Gary Gensler has vehemently opposed. A spot ETF would allow all investors to purchase the product through their brokerages. Bitcoin futures trading has traditionally been reserved for accredited investors.

Earlier this week, the SEC delayed a decision on whether to approve a proposed rule change that would allow Ark 21Shares, a fund owned by tech investor Cathie Wood, to launch its own spot bitcoin ETF. It also delayed a decision on Global X ETF’s application. The rest of the applications, including BlackRock’s, have decision deadlines of mid-October, although many in the industry expect the SEC to delay decisions on those as well.

Valkyrie's plan is to convert its existing Bitcoin futures ETF into a combined fund that offers both bitcoin and ether futures. The fund will be renamed the Valkyrie Bitcoin and Ether Strategy ETF, FOX Business has learned, but the Nasdaq ticker BTF will remain unchanged. The fund will begin to opportunistically purchase ether futures on Thursday, with a final name change effective Tuesday morning.

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"We are thrilled to be the first to offer ether futures to our investors as interest in the asset has grown exponentially over the past year," Valkyrie's Chief Investment Officer Steven McClurg told FOX Business.

Valkyrie had originally planned to begin trading its fund on October 3, but Friday's possible government shutdown has caused the SEC to accelerate launches of ethereum futures ETFs in the event the agency is forced to scale back operations.

Unless Congress comes to an agreement on funding, the federal government is scheduled to cease most of its operations on Saturday, furloughing nearly two million federal workers.

In a hearing before the House Financial Services Committee on Wednesday, Gensler said that companies planning to go public should do so before Friday, as the shutdown would force the agency to furlough around 92% of its employees and operate with a skeletal staff.

"The public won't have somebody, really at full force, overseeing the markets or companies that want to go public," Gensler said.

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The same is true of the ether futures applicants. It is unclear how many of the current applicants will launch in the coming days, but according to McClurg, the SEC has asked applicants to update their filings with any additional information by Friday afternoon.

"Digital assets is a growing allocation across all investors, and we only expect further interest in this area," said McClurg.