The US Securities and Exchange Commission (SEC) will make a decision on the Direxion Bitcoin exchange traded funds (ETFs) by 21 September 2018. To be clear, this is not the VanEck SolidX Bitcoin ETF that has been generating so much hype and positive comments, which is expected to be decided on by mid-August.

The NYSE Arca stock exchange applied to the SEC to list Direxion Bitcoin-related ETFs on 4 January 2018. The SEC generally has to make a decision on such applications within 180 days, but is allowed to postpone the decision another 60 days if necessary, which is what it did.

Five flavors of Direxion Bitcoin ETF are proposed and they come in two breeds, bull and bear. The bull ETFs go long on the Bitcoin market, which is where traders bet on the price going up. The bear ETFs short the Bitcoin market, which is where traders bet on the price going down. There are 1X and 2X bear ETFs, and 1.25X, 1.5X, and 2X bull ETFs. These ETFs use leverage to multiply the daily price movements of Bitcoin.

The VanEck SolidX Bitcoin ETF that is proposed are to be backed by actual Bitcoins, while the Direxion ETFs use the Bitcoin futures on CME and CBOE. Combined with the short selling and leveraging, it would be quite an extreme move if the SEC approved Direxion’s Bitcoin ETFs. That the SEC didn’t shoot down this ETF proposal within 180 days and is still considering it, and is probably a good indicator that a more “mellow” ETF like the VanEck SolidX Bitcoin ETF will be approved.

The SEC actually needs to change some rules for this Bitcoin ETF to get approved. It says, “Specifically, the Commission instituted proceedings to allow for additional analysis of the proposed rule change’s consistency with Section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and to protect investors and the public interest… The Commission finds it appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider this proposed rule change.”

Any approval of a Bitcoin ETF, whether it be Direxion or VanEck SolidX, is expected to cause a major Bitcoin rally.

 

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