Regulation
Invesco exec reveals reasons for dropping Bitcoin futures ETF
Invesco withdrew its Bitcoin Strategy ETF due to the inability to offer exposure to a mix of futures swaps and spot Bitcoin.
After dropping a filing for a Bitcoin (BTC) futures exchange-traded fund (ETF) in October, United States $1.6-trillion asset manager Invesco has disclosed the reasons behind its decision.
Anna Paglia, global head of ETFs and indexed strategies at Invesco, said that the biggest reason for dropping the filing was that the U.S. Securities and Exchange Commission only approved Bitcoin ETFs with 100% exposure to Bitcoin futures.
The Invesco Bitcoin Strategy ETF was designed to ideally be a mix of futures swaps, physical Bitcoin and private funds in the Bitcoin industry, Paglia said in a Sunday interview with the Financial Times. Such a composition would help protect investors in the event of a liquidity crisis, she stated, adding:
“We thought that CME futures were going to be a very effective element of the portfolio. We never thought they would be effective when they would be 100% of the product.”
Paglia said that Invesco realized that there are better ways of providing this particular exposure instead of giving investors something they didn’t need. She also cited concerns related to capacity and liquidity in the futures market.
Invesco originally filed for its Invesco Bitcoin Strategy ETF in early August, planning to invest its assets in Bitcoin futures and exchange-traded products, as well as Bitcoin-linked private investment trusts such as the Grayscale Bitcoin Trust. According to Paglia, Invesco filed for the ETF within 24 hours of SEC Chair Gary Gensler hinting the regulator might be open to approving Bitcoin futures ETFs traded on the Chicago Mercantile Exchange.
“It was easier to say ‘yes’ and see how it goes than ‘no’ and explain the decision. We had to make this hard choice and own the decision. I would do the same again,” Paglia noted.
Paglia’s remarks come soon after Bitwise Asset Management became another firm to drop its Bitcoin ETF application in early November despite the launch of Bitcoin futures ETFs such as the ProShares Bitcoin Strategy ETF and the Valkyrie Bitcoin Strategy ETF.
Related: SEC rejects VanEck’s spot Bitcoin ETF as BTC price falls below $63K
Bitwise chief investment officer Matt Hougan noted that the Bitcoin futures ETF contango — a situation where the futures price is higher than the spot one — could be costly for investors.
Hougan added that the company will continue its efforts to launch a spot Bitcoin ETF in the U.S. as no such products have been launched since Gemini crypto exchange founders Cameron and Tyler Winklevoss first filed for such a product back in 2017.
