Developed by ETF and crypto innovators, VanEck structured XBTF as a C-Corporation aimed at tax efficiency for long-term investors and fairly priced
VanEck today announced the anticipated launch of the VanEck Bitcoin Strategy ETF (XBTF), an actively managed ETF that seeks capital appreciation by investing in standardized, cash-settled bitcoin futures contracts. XBTF is expected to list on Cboe on November 16, 2021. XBTF comes to market as the lowest-cost bitcoin-linked ETF, with a net expense ratio 30 basis points (bps) lower than its next closest competitor,1 and has been structured as a C-Corp., an approach that may provide a more efficient tax experience for long-term investors.
XBTF is the first ETF in VanEck’s suite of U.S.-listed funds to provide exposure to bitcoin futures and joins VanEck Inflation Allocation ETF (RAAX) in providing investors with bitcoin exposure. RAAX has held positions in other bitcoin-focused products since January 2021.
XBTF is actively managed by Greg Krenzer, Head of Active Trading for VanEck. Mr. Krenzer joined the firm in 1994 and has more than two decades of experience trading in a host of asset categories, including the futures space. The Fund will invest primarily in bitcoin futures listed and traded on the CME, a category that has seen tremendous growth over the past three plus years. Average daily open interest in the CME’s bitcoin futures has increased from $77 million in average daily open interest in Q1 2018 to approximately $1.5 billion in Q3 2021.2
“While a ‘physically backed’ bitcoin ETF remains a key goal, we are very pleased to be providing investors with this important tool as they build their digital asset portfolios,” said Kyle DaCruz, Director, Digital Assets Product with VanEck. “Cost and tax treatment are two essential considerations for investors, and we have made both front and center in the design of XBTF. Investors deserve lower cost, transparent, regulated bitcoin exposures, and we’re pleased to be leading that charge with the launch of XBTF and all of our ongoing efforts in the bitcoin and digital assets space.”
XBTF is listed on Cboe and has a net expense ratio of 0.65%. State Street will provide services including ETF basket operations, custody of the ETF shares, fund accounting, order-taking and act as the transfer agent.
“We’re excited to be working alongside VanEck on the launch of the XBTF ETF, said Nadine Chakar, head of State Street Digital. “Our newly launched division, State Street Digital, was created to help drive innovation and address the industry’s evolving shift to digital finance, and we continue to prioritize developing our servicing capabilities as part of our broader strategy for the crypto and digital assets environment. We are pleased to further develop our longstanding partnership with VanEck on this important fund launch.”
VanEck has long been a leader in the digital assets space and, led by CEO Jan van Eck, was the first asset manager to file an application to launch a bitcoin futures exchange traded product. The firm recognized in early 2017 that digital assets could provide a store of value alternative to existing currencies and gold, as well as technology solutions that may lower costs in the payments and financial investing industries. VanEck produces a prolific amount of cutting-edge research on the digital assets space, including a helpful primer for both individuals and advisors on what investors should know about bitcoin futures. VanEck currently offers a range of digital assets related ETPs in Europe, and has a growing series of digital assets benchmark indices offered through its index subsidiary, MVIS.
VanEck has a history of looking beyond the financial markets to identify trends that are likely to create impactful investment opportunities. We were one of the first U.S. asset managers to offer investors access to international markets. This set the tone for the firm’s drive to identify asset classes and trends – including gold investing in 1968, emerging markets in 1993, and exchange traded funds in 2006 – that subsequently shaped the investment management industry.
Today, VanEck offers active and passive strategies with compelling exposures supported by well-designed investment processes. As of October 31, 2021, VanEck managed approximately $82.2 billion in assets, including mutual funds, ETFs and institutional accounts. The firm’s capabilities range from core investment opportunities to more specialized exposures to enhance portfolio diversification. Our actively managed strategies are fueled by in-depth, bottom-up research and security selection from portfolio managers with direct experience in the sectors and regions in which they invest. Investability, liquidity, diversity, and transparency are key to the experienced decision-making around market and index selection underlying VanEck’s passive strategies.
Since our founding in 1955, putting our clients’ interests first, in all market environments, has been at the heart of the firm’s mission.
The value of Bitcoin and the Fund’s Bitcoin Futures holdings, could decline rapidly, including to zero. You should be prepared to lose your entire investment. The Fund does not invest in bitcoin or other digital assets directly.
The further development and acceptance of the Bitcoin network, which is part of a new and rapidly changing industry, is subject to a variety of factors that are difficult to evaluate, the slowing, stopping or reversing of the development or acceptance of the Bitcoin network may adversely affect the price of bitcoin and therefore cause the Fund to suffer losses, regulatory changes or actions may alter the nature of an investment in bitcoin or restrict the use of bitcoin or the operations of the Bitcoin network or venues on which bitcoin trades in a manner that adversely affects the price of bitcoin and, therefore, the Fund’s Bitcoin Futures. Bitcoin generally operates without central authority (such as a bank) and is not backed by any government, Bitcoin is not legal tender and federal, state and/or foreign governments may restrict the use and exchange of Bitcoin, and regulation in the United States is still developing.
Futures Contract Risk. The use of futures contracts involves risks that are in addition to, and potentially greater than, the risks of investing directly in securities and other more traditional assets. The market for Bitcoin Futures may be less developed, and potentially less liquid and more volatile, than more established futures markets. Bitcoin Futures are subject to collateral requirements and daily limits that may limit the Fund’s ability to achieve its target exposure. Margin requirements for Bitcoin Futures traded on the Chicago Mercantile Exchange (“CME”) may be substantially higher than margin requirements for many other types of futures contracts. Futures contracts exhibit “futures basis,” which refers to the difference between the current market value of the underlying bitcoin (the “spot” price) and the price of the cash-settled futures contracts.
This risk may be adversely affected by “negative roll yields” in “contango” markets. The Fund will “roll” out of one futures contract as the expiration date approaches and into another futures contract on bitcoin with a later expiration date. The “rolling” feature creates the potential for a significant negative effect on the Fund’s performance that is independent of the performance of the spot prices of the bitcoin. A market where futures prices are generally greater than spot prices is referred to as a “contango” market. Therefore, if the futures market for a given commodity is in contango, then the value of a futures contract on that commodity would tend to decline over time (assuming the spot price remains unchanged), because the higher futures price would fall as it converges to the lower spot price by expiration. Extended period of contango may cause significant and sustained losses.
An investment in the Fund may be subject to risks which include, among others market and volatility, investment, futures contract, derivatives, investments related to bitcoin and bitcoin futures, derivatives, counterparty, investment capacity, target exposure and rebalancing, borrowing and leverage, indirect investment, credit, interest rate, illiquidity, investing in other investment companies, management, new fund, non-diversified, operational, portfolio turnover, regulatory, repurchase agreements, tax, of cash transactions, authorized participant concentration, no guarantee of active trading market, trading issues, fund shares trading, premium/discount and liquidity of fund shares, U.S. government securities, debt securities, municipal securities, money market funds, securitized/asset-backed securities, and sovereign bond risks, all of which could significantly and adversely affect the value of an investment in the Fund.
An investment in RAAX may be subject to risks which include, among others, in fund of funds risk which may subject RAAX to investing in commodities, gold, natural resources companies, MLPs, real estate sector, infrastructure, equities securities, small- and medium-capitalization companies, foreign securities, emerging market issuers, foreign currency, credit, interest rate, call and concentration risks, derivatives, cryptocurrency, cryptocurrency tax, all of which may adversely affect RAAX. RAAX may also be subject to affiliated fund, U.S. Treasury Bills, subsidiary investment, commodity regulatory (with respect to investments in the Subsidiary), tax (with respect to investments in the Subsidiary), risks of ETPs, liquidity, gap, cash transactions, high portfolio turnover, model and data, management, operational, authorized participant concentration, no guarantee of active trading market, trading issues, market, fund shares trading, premium/discount and liquidity of fund shares, and non-diversified risks. Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates which may negatively impact the Fund's returns. Small- and medium-capitalization companies may be subject to elevated risks.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
Cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Cryptocurrencies are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not generally backed or supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies. The value of cryptocurrency may be derived from the continued willingness of market participants to exchange fiat currency for cryptocurrency, which may result in the potential for permanent and total loss of value of a particular cryptocurrency should the market for that cryptocurrency disappear. Cryptocurrencies are not covered by either FDIC or SIPC insurance. Legislative and regulatory changes or actions at the state, federal, or international level may adversely affect the use, transfer, exchange, and value of cryptocurrency.
Investing in cryptocurrencies comes with a number of risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, cryptocurrency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing. There is no assurance that a person who accepts a cryptocurrency as payment today will continue to do so in the future.
Investors should conduct extensive research into the legitimacy of each individual cryptocurrency, including its platform, before investing. The features, functions, characteristics, operation, use and other properties of the specific cryptocurrency may be complex, technical, or difficult to understand or evaluate. The cryptocurrency may be vulnerable to attacks on the security, integrity or operation, including attacks using computing power sufficient to overwhelm the normal operation of the cryptocurrency’s blockchain or other underlying technology. Some cryptocurrency transactions will be deemed to be made when recorded on a public ledger, which is not necessarily the date or time that a transaction may have been initiated.
- Investors must have the financial ability, sophistication and willingness to bear the risks of an investment and a potential total loss of their entire investment in cryptocurrency.
- An investment in cryptocurrency is not suitable or desirable for all investors.
- Cryptocurrency has limited operating history or performance.
- Fees and expenses associated with a cryptocurrency investment may be substantial.
There may be risks posed by the lack of regulation for cryptocurrencies and any future regulatory developments could affect the viability and expansion of the use of cryptocurrencies. Investors should conduct extensive research before investing in cryptocurrencies.
Information provided by Van Eck is not intended to be, nor should it be construed as financial, tax or legal advice. It is not a recommendation to buy or sell an interest in cryptocurrencies.
Van Eck Securities Corporation, Distributor
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New York, NY 10017
1 Source: Public prospectus filings as of 10/21/21.
2 Source: CME Group. Data as of 9/30/21.
Chris Sullivan/Julia Stoll