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Invesco drops Bitcoin ETF over exclusive exposure to futures

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on Nov 22, 2021
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  • SEC approved only Bitcoin ETFs with exclusive exposure to Bitcoin futures
  • Invesco had a combination of private funds, physical Bitcoin, and futures swaps in mind
  • Bitwise Asset Management also withdrew its Bitcoin ETF application

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Invesco, the US fund managing assets worth $1.6 trillion, ultimately decided against a filing for a Bitcoin (BTC/USD) futures exchange-traded fund (ETF). According to Invesco’s global head of ETFs and indexed strategies Anna Paglia, the main reason they dropped the filing was that the SEC approved only Bitcoin ETFs with exclusive exposure to Bitcoin futures.

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Invesco had a combination of private funds, physical Bitcoin, and futures swaps in mind, Paglia told The Financial Times. She stated this balance would serve as a hedge for investors in the event of a liquidity crisis, 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. 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.

According to Paglia, giving investors something they don’t need was hardly a reasonable way to provide such exposure. She also cited issues like liquidity and capacity in the futures market.

Invesco was among the first to file

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Originally, Invesco filed for approval of its Invesco Bitcoin Strategy ETF in early August. They filed less than 24 hours after SEC chair Gary Gensler insinuated the regulator might approve trade of Bitcoin futures ETFs on the Chicago Mercantile Exchange.

Bitwise also dropped application

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At the beginning of November, Bitwise Asset Management also withdrew its Bitcoin ETF application even though ProShares Bitcoin Strategy ETF and Valkyrie Bitcoin Strategy ETF had already launched.

Bitwise chief investment officer Matt Hougan cited concerns over a situation where the spot price is lower than the futures price, which would be costly for investors. This situation is known as the Bitcoin futures ETF contango.

According to Hougan, Bitwise will keep trying to launch a spot Bitcoin ETF in the US. It would be the first proposal of its kind since Cameron and Tyler Winklevoss, the founders of Gemini crypto exchange, applied for approval of one almost 5 years ago.  

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