After submitting an application in October to create a Bitcoin Exchange Trading Fund (ETF) (BTC), the $1.6 trillion US asset manager Invesco revealed the reasons for the decision.
The main reason for the withdrawal is that the US Securities and Exchange Commission has only approved a Bitcoin ETF that is 100% based on Bitcoin futures, said Anna Paglia, head of global ETF and indexed strategies at Invesco.
The Invesco Bitcoin Strategy ETF is designed to be the perfect blend of futures swaps, physical bitcoin and private equity funds in the bitcoin industry, Paglia said in an interview with the Financial Times on Sunday. Such a formation would help protect investors in the event of a liquidity crisis, she said, adding:
“We thought CME futures would be a very effective portfolio component. We never thought they would be effective if they were 100% of the product.”
Paglia said Invesco realized there were better ways to give investors this opportunity, rather than giving investors what they don’t need. It also cited concerns about the capacity and liquidity of the futures market.
Invesco originally applied for the Invesco Bitcoin Strategy ETF in early August and plans to invest its assets in bitcoin futures and exchange-traded products, as well as bitcoin-related private equity funds such as the Grayscale Bitcoin Trust. Paglia said Invesco applied for the ETF within 24 hours after SEC President Gary Gensler suggested the regulator was open to accepting ETFs for bitcoin futures traded on the CME.
It was easier to say “yes” and see how things went than “no” and explain your decision. We had to make this difficult choice and make the decision ourselves. “I would have done the same thing again,” Paglia commented.
Paglia’s comments came immediately after Bitwise Asset Management became another company to pull back from the Bitcoin ETF in early November, despite launching Bitcoin Futures ETFs such as ProShares Bitcoin Strategy ETF and Valkyrie Bitcoin Strategy ETF.
Related: SEC Rejects VanEck Spot Bitcoin ETF As BTC Price Drops Below $63,000
Matt Hugan, chief investment officer at Bitwise, points out that bitcoin futures ETFs — a situation in which the price of the futures contract is higher than the spot price — can be costly for investors.
Hogan added that the company will continue its efforts to launch a Bitcoin ETF in the United States, where no such products have been launched since cryptocurrency exchange founders Cameron and Tyler Winklevoss applied for such a product in 2017.