VanEck, the company behind the first spot bitcoin exchange-traded fund (ETF) in Canada, has announced that it will liquidate its bitcoin futures fund in the US. The VanEck Vectors Bitcoin Strategy ETF, which was launched in August 2018, aimed to provide exposure to bitcoin futures contracts and other bitcoin-related investments. However, the fund failed to attract significant investor interest and had only $9.7 million in assets under management as of January 18, 2024.
The fund’s last day of trading will be January 26, 2024, and the liquidation process will begin on January 29, 2024. VanEck said that shareholders of the fund will receive cash proceeds equal to the net asset value of their shares as of the liquidation date. The fund’s closure does not affect VanEck’s other bitcoin-related products, such as the VanEck Bitcoin Trust and the VanEck Vectors Digital Assets Equity ETF.
The decision to shutter the bitcoin futures fund comes as VanEck faces increasing competition in the bitcoin ETF space. In October 2023, the US Securities and Exchange Commission (SEC) approved the first bitcoin futures ETFs, which track the performance of bitcoin futures contracts traded on regulated exchanges. Since then, several other issuers have launched similar products, attracting billions of dollars in inflows.
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VanEck was one of the first companies to file for a bitcoin futures ETF in the US, but its application was repeatedly delayed by the SEC. The regulator has not yet approved any spot bitcoin ETFs, which would directly hold bitcoin in custody and track its price movements. VanEck was able to launch a spot bitcoin ETF in Canada in February 2023, after receiving approval from the Ontario Securities Commission. The VanEck Bitcoin ETF (VBTC) is listed on the Toronto Stock Exchange and has over $1 billion in assets under management.
VanEck remains hopeful that the SEC will eventually approve a spot bitcoin ETF in the US, as it believes that such a product would offer investors a more transparent and efficient way to access the bitcoin market. The company said that it will continue to work with regulators and stakeholders to bring innovative and investor-friendly digital asset solutions to the market.
The fund, which aimed to provide exposure to bitcoin through regulated futures contracts, had failed to attract significant investor interest and assets. VanEck’s decision comes at a time when the bitcoin ETF market is becoming more crowded and competitive, with several new products launching in the past few months.
Some of these products offer direct access to bitcoin through physical custody, while others track the performance of bitcoin-related companies or indices. VanEck itself has filed for a physical bitcoin ETF, which is still pending approval from the SEC. The closure of the bitcoin futures fund suggests that VanEck is shifting its focus and resources to its other bitcoin ETF initiatives, which may have more appeal and potential in the long run.
TradFi types are likely to see opportunity to the downside in 2024
The year 2024 is expected to be a challenging one for the traditional finance (TradFi) sector, as the global economy faces multiple headwinds and uncertainties. The ongoing pandemic, geopolitical tensions, environmental crises, and regulatory changes are some of the factors that could negatively impact the performance and profitability of TradFi institutions and markets.
We will explore why TradFi types are likely to see opportunity to the downside in 2024, and what strategies they could adopt to mitigate the risks and capitalize on the opportunities.
One of the main reasons why TradFi types are likely to see opportunity to the downside in 2024 is the rise of decentralized finance (DeFi), which is a fast-growing alternative to TradFi that leverages blockchain technology and smart contracts to offer financial services without intermediaries.
DeFi has been gaining popularity and adoption among users, investors, and developers, as it offers advantages such as lower costs, higher efficiency, greater transparency, and more innovation. According to a report by Deloitte, the total value locked (TVL) in DeFi protocols reached $200 billion in November 2023, up from $20 billion in January 2023, representing a tenfold increase in less than a year. The report also projected that DeFi could capture up to 10% of the global financial market by 2025, posing a significant threat to TradFi incumbents.
Another reason why TradFi types are likely to see opportunity to the downside in 2024 is the potential for increased volatility and instability in the financial markets, due to various macroeconomic and geopolitical factors. For instance, the Federal Reserve has signaled that it will start tapering its quantitative easing program in 2022, and possibly raise interest rates in 2023, in response to rising inflation and economic recovery.
This could lead to a tightening of liquidity and credit conditions, as well as a repricing of risk assets, which could trigger a market correction or even a crash. Moreover, the global economy could face further shocks from the pandemic, such as new variants, vaccine resistance, or lockdowns, which could hamper growth and consumer confidence.
Additionally, the world could witness more conflicts and tensions among major powers, such as the US-China rivalry, the Russia-Ukraine crisis, or the Iran nuclear deal, which could escalate into trade wars or military confrontations, disrupting global trade and security.
Given these challenges and uncertainties, TradFi types are likely to see opportunity to the downside in 2024, as they could benefit from short-selling, hedging, diversifying, or arbitraging strategies. Short selling involves selling borrowed assets with the expectation of buying them back at a lower price later, profiting from the price difference. Hedging involves using derivatives or other instruments to reduce or offset the exposure or risk of an asset or portfolio.
Diversifying involves allocating funds across different asset classes, sectors, regions, or strategies to reduce correlation and dependence on a single source of return. Arbitraging involves exploiting price differences or inefficiencies between two or more markets or instruments to generate risk-free profits.
TradFi types are likely to see opportunity to the downside in 2024, as they face multiple threats and challenges from DeFi, market volatility, and geopolitical instability.
However, they could also adopt various strategies to mitigate the risks and capitalize on the opportunities, such as short-selling, hedging, diversifying, or arbitraging. The key is to be flexible, adaptive, and proactive in navigating the complex and dynamic financial landscape in 2024.