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Due to the inability to provide exposure to a mix of futures swaps and spot Bitcoin, Invesco discontinued its Bitcoin Strategy ETF.
After dropping a filing for a Bitcoin (BTC) futures exchange-traded fund (ETF) in October, the United States’ $1.6 trillion asset manager, Invesco, has disclosed the reasons behind the decision.
Anna Paglia, Invesco’s global head of ETFs and indexed strategies, said that the biggest reason for dropping the filing was that the U.S. Securities and Exchange Commission (SEC) 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.”
According to Paglia, Invesco concluded that instead of giving investors something they didn’t want, there are better methods to provide this type of exposure. She also expressed concerns about the futures market’s capacity and liquidity.
Invesco filed for its Invesco Bitcoin Strategy ETF in early August, intending to invest in Bitcoin futures, exchange-traded products, and Bitcoin-linked private investment trusts like the Grayscale Bitcoin Trust. According to Paglia, Invesco filed for the ETF within 24 hours of SEC chief Gary Gensler signalling that Bitcoin futures ETFs trading on the Chicago Mercantile Exchange would be approved.
“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 comments come after Bitwise Asset Management, despite the debut of Bitcoin futures ETFs like the ProShares Bitcoin Strategy ETF and the Valkyrie Bitcoin Strategy ETF, dropped its Bitcoin ETF application in early November.
The Bitcoin futures ETF contango — when the futures price is higher than the spot price — might be costly for investors, according to Bitwise chief investment officer Matt Hougan.
Hougan went on to say that the company will keep working on launching a spot Bitcoin ETF in the United States, despite the fact that no such products have been released since Gemini crypto exchange founders Cameron and Tyler Winklevoss originally filed for one in 2017.