Michael Bodley

Barbarians Are at Grayscale’s Gates. Can They Take Over GBTC?

Ben Strack

<div id="highlights-block_6274215980e39" class="highlights">
 <ul>
 <li>“We do believe that today’s news puts us closer to an eventual [spot bitcoin ETF] approval,” Valkyrie’s CIO told Blockworks</li>
 <li>The SEC approved a similar fund by asset manager Teucrium last month</li>
 </ul>
 
</div>



The SEC has signed off on the second bitcoin futures ETF filed under the same regulation that spot bitcoin ETF hopefuls have relied on — albeit unsuccessfully, so far.



Valkyrie Investments is eager to bring to market its <a href="https://www.sec.gov/rules/sro/nasdaq/2022/34-94853.pdf" target="_blank" rel="noreferrer noopener">recently approved</a> Bitcoin Futures Fund (XBTO), Chief Investment Officer Steven McClurg told Blockworks via email. The vehicle was filed under the Securities Act of 1933 (’33 Act).



The firm did not immediately comment on a launch date.



The SEC first allowed ETFs that invest in bitcoin futures contracts to launch last October. <a href="https://cms.blockworks.co/first-bitcoin-futures-etf-nears-1b-on-first-day-of-trading/" target="_blank" rel="noreferrer noopener">ProShares</a> was first to market with such a product, and <a href="https://cms.blockworks.co/valkyries-btf-trades-10m-in-first-5-minutes/" target="_blank" rel="noreferrer noopener">Valkyrie</a> and <a href="https://cms.blockworks.co/vanecks-bitcoin-futures-etf-set-to-launch-tuesday/" target="_blank" rel="noreferrer noopener">VanEck</a> followed with similar funds. The three products were filed under the Investment Company Act of 1940 (’40 Act).



Regulators <a href="https://cms.blockworks.co/sec-approves-bitcoin-futures-etf-filed-under-the-33-act/" target="_blank" rel="noreferrer noopener">approved</a> the first bitcoin futures ETF filed under the ’33 Act, from fund group Teucrium, last month.



Grayscale Investments CEO Michael Sonnenshein said at the time the ruling weakens the SEC’s argument to deny spot bitcoin ETFs, noting that the agency previously cited differences between the ‘40 Act and ‘33 Act as a rationale for denial. Grayscale is seeking to convert its Bitcoin Trust (GBTC) to an ETF, and an SEC decision on the proposal is expected in July.&nbsp;



Valkyrie is one of a handful of ETF issuers aiming to bring to market a product that invests directly in bitcoin. Though such investment vehicles exist in Canada, Europe and Latin America, regulators in the US have so far denied all attempts to launch such an ETF.&nbsp;



“As for a spot Bitcoin ETF, we do believe that today’s news puts us closer to an eventual approval, but would hesitate to put a timeline on such a decision and are instead keen to continue working with regulators to help further satisfy warranted concerns and collaboratively work towards progress in this rapidly evolving asset class,” McClurg said. 



Though crypto firm executives remain unsure when the agency could approve a spot bitcoin ETF, <a href="https://cms.blockworks.co/crypto-execs-read-the-tea-leaves-on-spot-bitcoin-etf-approval/" target="_blank" rel="noreferrer noopener">most believe</a> one won’t launch until 2023 at the earliest.



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Another Bitcoin Futures ETF Approved by SEC With No Spot Product in Sight

<div id="highlights-block_6271adcc07ecb" class="highlights">
 <ul>
 <li>New vehicle joins firm’s existing single-asset trusts focused on bitcoin, algorand, polkadot, dash, TRON and Zilliqa</li>
 <li>The trust will soon begin staking AVAX to generate additional returns</li>
 </ul>
 
</div>



Two weeks after launching its first multi-coin trust, Valkyrie Investments has added its first Avalanche-focused investment vehicle.



The Valkyrie Avalanche Trust (VAVAX), which will invest solely in the blockchain’s native token AVAX, is available to accredited investors. It carries a management fee of 2% and imposes a $25,000 minimum investment.



The price of Avalanche (AVAX) was about $61 on Wednesday morning, according to data compiled by Blockworks — down about 11% from a week ago. AVAX’s market capitalization of nearly $16 billion is the 14th highest among crypto coins.&nbsp;



AVAX adoption is growing rapidly due in part to its “blazing fast” transaction speeds, Valkyrie Chief Investment Officer Steven McClurg said in a statement. Avalanche is the fastest smart contracts platform as measured by time-to-finality and has the most validators securing transactions of any proof-of-stake protocol, according to the company.



“By launching this trust, we are able to give qualified investors exposure to a protocol that they have been increasingly asking about as [decentralized finance] projects, [non-fungible token] platforms and many other projects have increasingly begun to build on the Avalanche blockchain,” McClurg said.



The trust will soon begin staking AVAX to generate additional returns.



Based in Nashville, Valkyrie reached $1 billion in assets under management in February. The trust launch is Valkyrie’s second this year as the firm seeks to offer exposure to a wider universe of digital assets. Its six other single-asset trusts focus on bitcoin, algorand, polkadot, dash, TRON and Zilliqa.&nbsp;



“With the launch of the Avalanche Valkyrie Trust, institutions will have another reliable avenue to tap into the innovation happening across the community,” Ava Labs President John Wu said in a statement.



Valkyrie <a href="https://cms.blockworks.co/valkyrie-launches-its-first-multi-coin-trust/" target="_blank" rel="noreferrer noopener">launched its first multi-coin trust</a> last month, which represents the firm’s “highest-conviction plays” in the crypto space. Upon launch, 10% of fund capital was allocated to AVAX.



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Crypto Asset Manager Valkyrie Launches Avalanche Trust for Accredited Investors

<div id="highlights-block_62605d9d486dd" class="highlights">
 <ul>
 <li>Industry at an “inflection point” where family offices and high-net-worth individuals are seeking multi-asset exposure, Valkyrie CIO says</li>
 <li>Trust currently invests in eight assets, including AVAX, BNB and ATOM</li>
 </ul>
 
</div>



Valkyrie Investments has launched its first multi-coin trust, as the product was designed to offer diversified exposure to protocols and pass along staking yields to investors.



The actively managed <a href="https://valkyrieinvest.com/trusts/valkyrie-multi-coin-trust/" target="_blank" rel="noreferrer noopener">Valkyrie Multi-Coin Trust</a> is focused on investing in blockchain networks and tokens that the firm believes are well-positioned to expand market share. It is for accredited investors only and has a minimum investment of $100,000.



The trust, which carries a management fee of 2.5%, was launched after discussions with potential investors looking for a product that represented the firm’s “highest-conviction plays” in the space, said Valkyrie Chief Investment Officer Steven McClurg.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“We launched this fund now because we believe the industry is at an inflection point where family offices, high-net-worth individuals and others are keen to enter the space and are looking for opportunities that go beyond just buying and holding a single asset,” he told Blockworks.</blockquote>



The trust currently allocates 10% of the fund’s capital to each of Avalanche (AVAX), Binance (BNB), Cosmos (ATOM), Helium (HNT), Terra (LUNA), Polygon (MATIC), and Zilliqa (ZIL), plus a 30% allocation to the Gemini USD (GUSD) stablecoin. The investments can change over time as crypto markets evolve.



“We believe that these protocols all have a bright, bullish future, and should see increased adoption and engagement in the coming years,” McClurg added, noting that the firm believes in the protocols’ founding teams and the projects being built on them.



Focusing on these coins also enables the firm to return staking yield to investors, he said, referring to the inflation rewards earned for participating in a network’s <a href="https://cms.blockworks.co/proof-of-work-vs-proof-of-stake-whats-the-difference/" target="_blank" rel="noreferrer noopener">proof-of-stake</a> consensus. The trust seeks to target an annual yield of four to six percent, and the fund’s custodian is Copper Technologies.



Based in Nashville, Valkyrie reached $1 billion in assets under management in February. The company currently offers six single-asset trusts focused on bitcoin, algorand, polkadot, dash, TRON and Zilliqa.&nbsp;&nbsp;&nbsp;



The firm also has three ETFs trading in the US, including a bitcoin miners ETFs and a <a href="https://cms.blockworks.co/valkyries-btf-trades-10m-in-first-5-minutes/" target="_blank" rel="noreferrer noopener">bitcoin strategy fund</a> that invests in futures contracts.



McClurg said Valkyrie has more ETFs and trusts in the works, but declined to share specifics. The company is one of a handful of issuers seeking to launch a spot bitcoin ETF, which the SEC <a href="https://cms.blockworks.co/crypto-execs-read-the-tea-leaves-on-spot-bitcoin-etf-approval/" target="_blank" rel="noreferrer noopener">has not yet approved</a>.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.