Valkyrie submitted their Bitcoin Miner ETF application to the SEC on January 26th, 2022. The investment firm plans to have the ETF trade on the NASDAQ Stock Exchange with the ticker “WGMI”.
WGMI would allow investors to gain exposure to publicly traded Bitcoin miners for an annual management fee of 0.75%. The fund will have at least 80% of its net assets (including borrowings) in securities that earn 50% of their revenue or profit from bitcoin mining, software, hardware, or other mining related services.
The fund does not plan on holding bitcoin. This includes indirectly gaining exposure to bitcoin through derivatives or trusts that hold bitcoin. However, WGMI may invest 20% of their net assets in companies that hold bitcoin on their balance sheet such as Block, Microstrategy, and Tesla.
ESG compliance is also a factor that WGMI is considering in order to attract investment from both institutional and retail investors. The fund plans on holding shares of companies that use 50% or more renewable energy for mining activities.
The application goes on to specify the risks involved with investing in a fund structured as a “non-diversified” equity. This highlights the fact that all investments that the fund makes will be within the same sector and are affected by bitcoin’s price.
With continued delays for a U.S. spot bitcoin ETF, companies like Valkyrie are looking for alternative ways to satisfy demand from investors who want exposure to bitcoin correlated assets. Valkyrie’s Bitcoin Miner ETF is part of this growing trend as it allows investors to gain exposure to the price of bitcoin without having to purchase bitcoin directly. However, many argue that a spot bitcoin ETF would be the best product to meet this demand. The SEC has continued to reject spot ETF applications. They argue that the unregulated nature of spot markets makes a spot ETF unpalatable with the SEC’s mandate of investor protection. Bitcoin futures ETFs have been approved as those markets are regulated by the CFTC.