The choice to delist the VanEck Bitcoin Strategy ETF occurred about a week following the approval granted by the SEC for the inclusion of shares from its spot Bitcoin ETF.
Strategic Shift in Response to SEC Approval
In a statement on January 17, VanEck disclosed that its trustees had given the green light for the closure and winding down of its Bitcoin Strategy Exchange-Traded Fund (ETF) on the Cboe BZX Exchange, around two years following its introduction.
The VanEck Bitcoin Strategy Exchange-Traded Fund (XBTF) offered access to Bitcoin futures contracts as opposed to directly investing in the cryptocurrency. In an authorized declaration released, VanEck explained that the choice was reached following an assessment of various elements, encompassing the fund’s effectiveness, liquidity, total assets, and investor engagement.
“With the endorsement of our spot Bitcoin ETF, we are ceasing operations of our ETF designed for investing in Bitcoin futures.”
VanEck Clients can Sell their Shares
VanEck mentioned that shareholders of XBTF have the option to sell their shares on the Cboe exchange, by the end of January 2024.
“Shareholders retaining shares of the Fund on the anticipated liquidation date, approximately February 6, 2024, will be provided with a distribution of cash in a segment of their brokerage accounts, equivalent to the total asset value of their shares,” as stated by the company.”
The delisting and liquidation of the shares are anticipated to conclude by February 6, 2024. This implies that the funds resulting from the liquidation will be arranged and transmitted to shareholders by the mentioned date.
VanEck additionally recommended that shareholders seek guidance from tax experts, as they typically incur capital gains tax on the variance between the liquidation proceeds and the initial cost basis of their investment.
Challenges and Risks Associated with Bitcoin Strategy ETF Ventures
Introduced in November 2021, the Bitcoin Strategy Exchange-traded fund might not have garnered significant interest due to inherent limitations in funds based on Bitcoin futures. Detractors contend that such funds typically yield lower returns compared to merely holding Bitcoin over an extended period due to the prevalence of “contango” markets.
In contango, futures contract prices surpass spot prices, signaling the expectation of a rise in the future price of the underlying asset, coupled with elevated expenses and added intricacy.
VanEck emphasized in risk disclosures that Bitcoin-based futures funds may experience a “substantial adverse effect” from contango. The company also pointed out the considerable volatility of Bitcoin itself, highlighting its susceptibility to manipulation and sudden price declines. Regulatory uncertainties were also acknowledged, given that cryptocurrencies are predominantly unregulated in many parts of the world.
The disclosure mentions, “The absence of regulation for cryptocurrencies may present risks, and potential future regulatory changes could impact the feasibility and growth of cryptocurrency usage.”
Founded in 1955 and introducing its ETF business in 2008, VanEck has continuously recognized emerging trends ahead of widespread acceptance. With over 60 years of operation, the asset manager oversees more than $89 billion in assets, providing investment products in diverse emerging sectors like emerging markets and gold.
Drawing from its history of introducing innovative investment products such as ETFs and gold funds in previous decades, VanEck utilizes its wealth of experience and research capabilities. Nonetheless, the recent discontinuation of the Bitcoin Strategy ETF signifies a setback in its endeavors and initiatives within the cryptocurrency.