New ETF Proposal Mixes Bitcoin with Sovereign Debt

ETF proposal bitcoin sovereign debt cryptocurrencies Bitcoin exchange traded funds

Bitcoin exchange traded funds are considered by many investors to be the key to mass institutional investment in cryptocurrencies. Yet to date, these instruments have been rejected by securities regulators in every instance, over concerns about the liquidity and volatility of cryptocurrency markets.

Now, a new ETF plans to address these concerns, offering a combination of bitcoin futures alongside other, more conservative investment products.

Blockforce Capital’s Reality Shares ETF Trust has brought forward plans to a new ETF known as the Reality Shares Blockforce Global Currency Strategy ETF, with application paperwork already filed with the U.S. Securities and Exchange Commission.

According to the filing, the fund would invest in bitcoin futures, alongside the likes of sovereign debt instruments, money market mutual funds and cash equivalents.

The fund will not directly invest in cryptocurrency, instead opting to trade in “cash-settled” futures — contracts that are settled for cash value, rather than ownership of the underlying asset.

According to the filing documentation, a maximum of 15 percent of the fund’s assets would be invested in “notional exposure” to bitcoin futures.

“The Adviser initially constructs the Fund’s portfolio by investing approximately (i) an equal-weight of 15 [percent] of the Fund’s net assets in Fixed Income Securities denominated in each Fiat Significant Global Currency; (ii) 15 [percent] of the Fund’s net assets representing notional exposure in Bitcoin Futures and (iii) 10 [percent] of the Fund’s net assets in Money Market Instruments for margin and/or cash management purposes, each as measured at the time of purchase (the ‘Target Portfolio’).”

The fund would also be responsive to price movements of 20 percent in either direction, to allow for reallocation and rebalancing of its portfolio.

“The Adviser seeks to reallocate the Fund’s assets approximately to the Target Portfolio on the business day following the date that one or more of the Significant Global Currencies moves by more than 20 [percent] up or down from its original 15 [percent] portfolio equal-weight, calculated as a percentage of the Fund’s net assets.”

The ETF is already causing waves among crypto investors, with many hopeful these restrictions could be enough to persuade the SEC to give regulatory approval.

If approved, the ETF would be expected to present a viable opportunity for institutional investors and financial companies to trade instruments pegged to cryptocurrency markets, which many in the blockchain community regard as instrumental to mass adoption and mainstream acceptance.