BACKGROUND
While the excitement around spot Bitcoin continues and ETF issuers are lining up in anticipation for SEC approval, some regulatory barriers still exist. This is reminiscent of the introduction of Bitcoin futures, which marked a turning point and triggered an equally wild race among ETF issuers, both large and small, to be the first to launch a Bitcoin futures ETF. This rush resulted in numerous SEC filings, though they ultimately faced rejection, setting the stage for a fierce competition in a rapidly evolving market. In August 2020, the regulatory landscape shifted when the SEC allowed for the filing and launch of Bitcoin futures ETFs, a move that opened doors for innovators like Valkyrie Funds. Recognizing the potential in this nascent space, Valkyrie Funds seized the opportunity to compete against major firms in the industry and make their mark with its own Bitcoin futures ETF.
ENGAGEMENT
Valkyrie turned to Vident to help accomplish this ambitious goal. The engagement attracted significant media attention, contributing to the heightened anticipation surrounding ETF launches in this sphere.
Vident’s deep roots in the ETF industry, coupled with a team of experts well-versed in trading beyond the standard set of equity funds to commodities and futures contracts, made them the ideal partner for Valkyrie’s initiative. Given the novelty and complexity of the project, not many firms would have accepted the challenge. However, Vident’s expertise in managing complex product launches and maintaining them over time assured Valkyrie of Vident’s ability to navigate the demanding landscape.
CHALLENGES
Valkyrie turned to Vident to help accomplish this ambitious goal. The engagement attracted significant media attention, contributing to the heightened anticipation surrounding ETF launches in this sphere.
The pioneering endeavor faced various obstacles, primarily revolving around regulatory complexities and trading concerns. Among the key concerns were identifying which market makers would be willing to make a market in this fund, selecting the lead market maker, and determining the initial assets for the fund. Additionally, the team faced last-minute setbacks, such as a futures commission merchant backing out due to capacity issues with a competing issuer the day before the scheduled launch.
SOLUTION
Vident exhibited agility and creativity in problem-solving by securing a trading partner before the scheduled launch and managing the fund to meet quarter-end requirements. Despite numerous challenges, the fund successfully launched on schedule and gathered over $50 million in assets in the first few days.[1]
Ultimately, the partnership between Valkyrie and Vident proved to be a success. Not only did it enable Valkyrie to effectively compete against some of the largest ETF issuers in the industry, but it also led the firm to a prominent position in the Bitcoin futures ETF space. More than just a service provider, Vident proved itself a partner committed to relationship loyalty, fostering a community of trust and going above and beyond to internalize and realize Valkyrie’s vision.
This case study showcases the ability of Vident to navigate the complexities of an evolving financial landscape, providing expert guidance to its clients and ensuring the successful realization of innovative financial products.
[1] As of October 27, 2021. Source: Bloomberg.
This case study is not a recommendation to purchase or sell any security or commodity referenced herein. The case study is an illustration, as authored by Vident, of how Vident can and does partner with others in helping bring ideas to life. There is no guarantee that any product, security, or commodity will be profitable. Investing involves the risk of loss. Vident serves as sub-adviser for Valkyrie’s fund.
