The SEC approved Invesco’s Bitcoin futures ETF application, but the company unexpectedly scrapped plans to launch the product. The decision was attributed to the significant shortcomings of such an ETF.
Anna Paglia, head of ETF and index strategies at Invesco, told the Financial Times that the reason for not launching an exchange-traded fund for bitcoin futures was issues of cost and suitability for investors. We are talking about the exchange term “contango” – the value of futures on an asset grows, and when positions are carried over to the next month, the fund usually incurs losses.
“We think CME Bitcoin futures will be an effective portfolio item. But we never said that products made exclusively from such futures would be effective, ”Paglia emphasized.
A top manager of Invesco said that an ideal investment portfolio should contain a set of various futures, swaps, direct investments in bitcoin, ETFs and investments in private funds. This will protect investors from any liquidity problems.
“The inability to provide such a product made us withdraw our application. The more we researched the market, the better we realized that there is a better way to provide investors with access to Bitcoin. A simple Bitcoin futures ETF is not what they expect from Invesco. We ran a lot of simulations and each month it would cost us 60 to 80 basis points to extend the futures. That in annual terms ranges from 5% to 10% “, – said Anna Paglia.
Paglia said that the decision to apply for the launch of the fund with the SEC was made within 24 hours after Gary Gensler’s words about supporting the launch of such ETFs. At the same time, a lot of effort was invested in the ETF application. And refusing to launch ETFs on Bitcoin futures is a very difficult decision. However, if they had to do it again, the management of Invesco would repeat this decision.
Earlier, the decision to withdraw the ETF application for bitcoin futures was also made by Bitwise. According to the company’s investment director Matt Hougan, such a decision is rather unusual, given the significant amount of work on the application. The company’s management considered that it would be more promising to create a subsidiary in the Cayman Islands and launch an ETF with direct investments in BTC. In addition, futures funds were deemed too “imperfect”.
In September, Invesco partnered with Galaxy Digital to launch several exchange-traded funds (ETFs) for cryptocurrencies.
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