Invesco, with $1.6 trillion in assets under management, unexpectedly curtailed plans to launch a bitcoin ETF last month when there were a few hours left before the listing. Now Invesco claims that the decision was dictated by regulatory restrictions, due to which the fund would become too burdensome for customers.
The U.S. Securities and Exchange Commission (SEC) in October allowed bitcoin futures-based ETFs to be traded, but refused to create a fund whose assets would be invested directly in cryptocurrency. As explained in Invesco, the transfer of futures to the next month is usually associated with losses for the fund due to differences between the price of cryptocurrencies and contracts.
"We believed that Chicago Mercantile Exchange (CME) futures would become a very effective element of the portfolio. But we never thought that they would be effective, making up 100% of the entire product," said Invesco.
According to the company, the bitcoin ETF basket should include futures, swaps, the cryptocurrency itself and private funds in order to protect investors from liquidity depletion:
"The inability to do this has become a determining factor in our decision. As we studied the market and the cryptocurrency space, we became convinced that there are better ways to invest in bitcoin. We calculated that the cost of transferring futures is 60-80 basis points per month. We are talking about serious numbers, 5-10% in annual terms."
The company explained that they submitted an application for the creation of an ETF within 24 hours after the head of the SEC, Gary Gensler, allowed the possibility of approving a futures fund. It was important to apply among the first, however, upon a deeper study of the issue, it turned out that the fund is unlikely to meet the expectations of investors, Invesco notes:
"We thought long and thoroughly before withdrawing the application. We knew people would have questions. It was easier to let things take their course than to refuse. We had to make a difficult choice. We would do exactly the same now."
Invesco's point of view is shared by Bitwise Asset Management investment director Matt Hogan, whose company also withdrew an application to launch a bitcoin ETF, despite the time and money invested:
"When we applied, we thought we could structure the product more freely. We thought it was a good solution, but later it turned out that the costs are superimposed on the costs, which is why such a tool is not able to support the interests of long-term investors."