Direxion, one of the largest issuers of inverse and leveraged exchange-traded funds, is looking to add bitcoin products to its stable of geared ETFs.
In a recent filing with the Securities and Exchange Commission, Direxion unveiled plans for the Direxion Daily Bitcoin Bear 1X Shares, Direxion Daily Bitcoin 1.25X BullShares, Direxion Daily Bitcoin 1.5X Bull Shares, Direxion Daily Bitcoin 2X Bull Shares and Direxion Daily Bitcoin 2X Bear Shares.
The funds "will offer investors the opportunity to obtain daily short, leveraged long or leveraged short exposure to the lead month bitcoin futures contract traded on the Chicago Mercantile Exchange ("CME") or on Cboe Global Markets, Inc. ("CBOE") or on any other U.S. exchange that subsequently trades bitcoin futures contracts,” according to the filing.
Adding Leverage To Digital Currencies
Digital currencies have rapidly developed a reputation for being a volatile asset class, meaning it was probably just a matter of time before ETF issuers looked to add leverage to the equation. Still, it pays to remember leveraged cryptocurrency ETFs, assuming the funds come to market, will carry the same warnings as traditional leveraged ETFs. Mainly, these funds are intended to be short-term, intraday instruments.
"Each Fund will seek daily correlation to the target benchmark and should not be expected to track the performance of the target benchmark for any period longer than one business day," according to Direxion's filing. "Additionally, while each Fund will seek daily correlation to the target benchmark, it should not be expected to track dollar for dollar the spot price of bitcoin because the Fund will invest in Bitcoin Futures Contracts rather than directly in bitcoin, and the spot price movements of bitcoin may not correspond directly to price movements of the Bitcoin Futures Contracts."
The idea of lightly leveraged ETFs isn't new. Direxion already offers two such products, the Direxion Daily S&P 500 Bull 1.25X Shares LLSP and the Direxion Daily Small Cap Bull 1.25X Shares LLSC.
Another Direxion Bitcoin ETF
Last year, Direxion filed plans for a more traditional bitcoin fund, the Direxion Bitcoin ETF. Assuming that fund is approved, it will look to “to provide total return that exceeds that of bitcoin futures contracts over a complete market cycle," according to a SEC filing.
The SEC has yet to approve any ETF based on digital currencies.
Related Links:
Issuers Scramble To Launch Bitcoin ETFs
Commodity, Currency, Security, Or Scam: What Type Of Asset Do You Think Bitcoin Is?
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