Just three days after the launch of the ProShares Bitcoin Strategy ETF (BITO), we have our 2nd bitcoin ETF to hit the market.
The Valkyrie Bitcoin Strategy ETF (BTF) debuted today and will follow substantially the same structure and strategy of BITO. That's to say that it will invest in current month bitcoin futures contracts, not physical bitcoin, and will roll those contracts over on a monthly basis.
Based on its original SEC filing, it looked like the fund might start trading as early as Wednesday, just one day after BITO's launch, but minor clean-ups in the regulatory documents, including a last minute switch away from the BTFD ticker back to the original BTF, delayed the launch by a couple of days.
BTF began trading to some fanfare, but not nearly the degree of attention that BITO received this week. BITO already has roughly $1.4 billion in assets and traded more than $1 billion worth of shares on its 2nd trading day alone.
While that is certainly a success, BITO is almost becoming too successful. Its objective is to invest in current month contracts only, which today would be the October expiration. It's accumulated enough assets that it's needed to split its allocation between the October and November expiration dates and is going to potentially run into capacity issues since it's quickly approaching the maximum allowable position. Going further out in expiration dates increases the risk that a fund will be unable to maintain a high correlation to the underlying asset's spot value.
In that sense, BTF may now be the preferred bitcoin ETF. Its smaller asset size allows it to focus entirely on current month contracts and create a potentially tighter link to spot bitcoin prices. The difference, admittedly, will probably be minor, but it's still an advantage for BTF in its current state.
BTF has traded around $55 million worth of shares at the midpoint of day 1. That's going to be a fraction of what BITO traded in its first few days, but certainly a solid start. I'll be interested in seeing how much of this volume can carry over into next week and if it can follow up on BITO's trajectory.
The "first to land" advantage for BITO looks like it will be significant, but I think BTF will actually provide a bit of competition here. If it can hold tight to its current month futures positions and avoid the possibility of needing to move into further out contracts due to capacity issues, I think it can hold a real advantage over BITO. Unfortunately, BITO is going to be viewed as "the" bitcoin ETF to many since it debuted first and has already experienced such heavy trading volume.