Ethereum ETF: Valkyrie Halts Purchase Of ETH Futures Contracts

Asset management firm Valkyrie, one of the frontrunners for the first Ethereum ETF (exchange-traded fund) in the United States, has decided to pause its purchase of Ether futures contracts until the US Securities and Exchange Commission approves an Ether futures ETF. This comes barely a day after the asset manager reportedly secured approval to offer investors exposure to Ether futures under its existing strategy ETF (BTF).

On Friday, September 29, Valkyrie filed a 497 with the SEC, saying that it would halt the purchase of Ether futures contracts and unwind its existing positions. 

A part of the filing read:

Effectively immediately, The Fund will not purchase ether futures contracts until the effectiveness of an amendment to the Fund’s registration statement contemplating the addition of ether futures contracts to the principal investment strategy of the Fund. Until such time, the Fund will unwind any existing positions in ether futures contracts.

As reported on Thursday, September 28, the SEC appears to be fast-tracking the approval of Ethereum futures ETF in anticipation of a potential US government shutdown next week. 

Following this report, Valkyrie disclosed that it had begun purchasing Ether futures contracts for its combined strategy ETF ahead of a possible launch next week.

However, this latest action poses questions about the odds of Valkyrie becoming one of the first firms to introduce an Ethereum ETF in the United States. 

Bloomberg analyst Eric Balchunas has put forward a possible reason for Valkyrie’s decision to halt and unwind its Ether futures purchases. “SEC must have threatened them to cut it out,” Balchunas speculated via a post on X (formerly Twitter).

The plot thickens, Valkyrie just put out 497 that they are in fact not going to buy Ether futures until they are live (prob Tue) and are going to sell the Eth futures they bought (in an effort to jump line a bit). SEC must have threatened them to cut it out. Damn. https://t.co/yDkggCw3d1 pic.twitter.com/cKaV7k7AJs

— Eric Balchunas (@EricBalchunas) September 29, 2023

Valkyrie filed its unique Ethereum ETF application with the SEC in August. The asset manager seeks to convert its existing Bitcoin Strategy ETF (BTF) to a combined Bitcoin and Ether futures ETF.

According to Eric Balchunas’ analysis, about nine Ethereum ETFs will potentially start trading on Monday, October 2. Notably, asset manager ProShares owns three of these funds, with two being combined Bitcoin and Ethereum ETFs.

VanEck is another frontrunner for the first Ether futures ETFs in the US. The investment manager recently announced its intention to donate 10% of profits from its Ethereum ETF (EFUT) to The Protocol Guild, a compensation plan for Ethereum core contributors.

VanEck wrote on X (formerly Twitter): 

If TradFi stands to gain from the efforts of Ethereum’s core contributors, it makes sense that we also give back to their work. We urge other asset managers/ETF issuers to consider also giving back in the same way.

Big announcement!

We intend to donate 10% of our $EFUT ETF profits (https://t.co/gr652AkUvv) to @ProtocolGuild for at least 10 years.

Thank you, Ethereum contributors, for nearly a decade of relentless building & ongoing stewardship of this common infrastructure.

Details

— VanEck (@vaneck_us) September 29, 2023

It is worth mentioning that the ETH price has seen some reprieve since news of the potential Ethereum ETF launch started making rounds. As of this writing, Ether is valued at $1,676, reflecting a substantial 5% price jump in the past week.