On Tuesday 8th February, the United State’s SEC approved another Bitcoin-linked exchange-traded fund (ETF). The Valkyrie Bitcoin Miners ETF received approval to list on the Nasdaq exchange under the ticker symbol WGMI, being only the second ETF approved since the ProShares Bitcoin Strategy ETF (BITO) was listed on the NYSE in October 2021.
The Valkyrie Bitcoin MIners ETF is designed for investors looking to gain exposure to bitcoin miners. According to its documents filed with the SEC, the ETF will:
- Invest 80% of its assets in bitcoin mining companies. They have to derive at least 50% of their profit from mining BTC
- Valkyrie also looks to invest in companies that use at least 77% renewable energy in their mining operations
- Valkyrie will invest about 20% of its assets in companies that hold “a significant share of their net assets in BTC.”
- The ETF will have an expense ratio of 0.75%
The top five holdings in the ETF are Argo Blockchain (ARBK), Hive Blockchain (HIVE), Bitfarms (BITF), Cleanspark (CLSK), and Stronghold Digital Mining (SDIG). All these have holdings of 8–10%, with others such as Digihost Technology (DGHI) and Marathon Digital (MARA) holding at least a 4% allocation.
Valkyrie became one of the pioneers to offer indirect exposure to crypto trading last October with its Bitcoin Strategy ETF, which traded at $23.17 AUD at the time of publishing.
Other ETFs listed in the US linked to Bitcoin mining include the Viridi Cleaner Energy Crypto-Mining & Semiconductor ETF (RIGZ), and the Bitwise Crypto Industry Innovators ETF (BITQ). We also have one that launched recently here in Australia, the Cosmos Global Digital Miners Access ETF (DIGA).
This Is Still a Futures ETF
The US has waited a long time to have BTC-wrapped ETFs approved, falling far behind Europe and Canada. The first ETF was welcomed with much pomp and fanfare, accumulating over $1.8 billion AUD in its first three days.
Subsequent ETFs have generated much lower momentum, but there is still a lot of hope that Bitcoin ETFs (even futures) will become a multi-billion dollar market.
Despite this increased interest in Bitcoin and crypto in general, the US is yet to approve a Bitcoin spot ETF. The difference between a futures ETF and a spot ETF is that, while a futures ETF expires monthly, a spot ETF is tied to the actual asset and can thus hold its position indefinitely.
While a spot ETF wrapped around an unregulated asset such as BTC presents considerably more risk, it also has the potential for higher returns and involves less expenses. In a contango situation (when later month futures are more expensive than near-month futures) this may be unsustainable for investors.
Experts believe that the time is now for a spot ETF. Grayscale’s global head of ETFs, said David LaValle,
[W]e believe now is the opportune time to have a spot product approved by the SEC and available for all of our investors.”
Despite investing in Bitcoin mining companies, Valkyrie’s Bitcoin Miners ETF is still a futures ETF because it will invest in their securities instead. For example, it cannot hold BTC. A spot ETF would offer direct exposure to Bitcoin.
US Far Behind Canada and Europe
Spot bitcoin ETFs have been available in Europe for years, and only recently in Canada. The regulatory and legal framework of such ETFs already exists and has been battle-tested, and investors have hope that the US will not be left far behind.
However, if you are planning on investing in Bitcoin ETFs, remember that they still carry the same risks as actual Bitcoin trading despite being regulated. They are also exposed to the same price volatility, so remember to do your due diligence and invest wisely.