Direxion withdraws inverse Bitcoin ETF application on SEC’s request
Popular ETF manager Direxion has withdrawn its application for its ‘Direxion Bitcoin Strategy Bear ETF’ on November 2nd.
The company had submitted a prospectus for inverse Bitcoin futures ETFs to the SEC on October 26. However, shortly thereafter, an SEC staff recommended that the application be withdrawn.
The reason for withdrawal was quoted from the SEC’s former Division of Investment Management Director Dalia Blass’s January 2018 letter. The letter, titled “Engaging on Fund Innovation and Cryptocurrency-related Holdings,” cited investor protection issues such as liquidity, potential manipulation, and valuation challenges.
Inverse ETFs take a short position on underlying assets, that is, betting that the value of the underlying asset would decline in the short term. The filing by Direxon had stated:
“The trust intends to engage in an informal discussion with the staff regarding the proposed fund and to seek effectiveness via a subsequent amendment to the registration statement as soon as is practicable.”
Last week, Valkyrie also withdrew its application for a leveraged Bitcoin ETF which was supposed to offer 1.25x exposure to the bitcoin reference rate. The SEC has made clear that while they have approved applications for future-based ETFs, they are not quite ready to authorize complex crypto ETFs yet.
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