The New York Stock Exchange (NYSE) has filed to list five leveraged exchange-traded funds that track the price of bitcoin (bitcoin ETFs) on its Arca trading platform.
According to documents (PDF) filed with the US Securities and Exchange Commission (SEC) and dated Jan. 4, the NYSE hopes to list five bitcoin ETFs created by Direxion Asset Management, a fund provider that has about $12.5 billion under management, per data from its website.
Launched under the Direxion Daily Bitcoin banner, the funds are titled: Bear 1X, 1.25X Bull, 1.5X Bull, 2X Bull, and 2X Bear.
As their names suggest, the value of bull shares will increase or decrease along with the price of bitcoin futures, while the value of bear shares will increase when the price of bitcoin futures declines but decrease when bitcoin futures become more valuable.
If approved by the SEC, these funds will provide investors with the potential to achieve outsized gains versus investing directly in the bitcoin futures markets, but they will not be for the faint of heart, as they will introduce more risk into an already volatile market.
Like all of the bitcoin ETFs that have been proposed in recent weeks, the Direxion funds will seek to track the price of bitcoin futures contracts on a daily basis. However, unlike most of those ETFs, every Direxion fund except for Bear 1X will exercise leverage in a bid to multiply investor returns.
As the filing explains, these funds will target “investment results (before fees and expenses) that correlate positively to either 125%, 150%, or 200% the daily return of the target benchmark,” depending on the amount of leverage exercised by each fund.
For example, this means that for every one percent increase in the price of bitcoin futures, the share price of 2X Bull will increase by two percent, while the share price of 2X Bear will decrease by two percent.
The NYSE’s desire to list these products is somewhat surprising, given that Intercontinental Exchange (ICE) — the exchange’s parent company — had expressed hesitation to list bitcoin futures products themselves. However, ICE does not appear to have the same concerns about ETFs, and it has already filed to list both long and short bitcoin ETFs from well-known fund provider ProShares.
Write to Josiah Wilmoth at josiah.wilmoth(at)ccn.com.
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