VanEck closes its Bitcoin Strategy ETF, citing lack of investor interest

Asset manager VanEck announced today that its board of trustees had approved the liquidation and dissolution of its Bitcoin Strategy ETF on the Cboe BZX Exchange, barely two years after its launch.

The VanEck Bitcoin Strategy ETF (XBTF) provided exposure to bitcoin futures contracts instead of direct investment in the cryptocurrency. In an official statement issued today, VanEck said the decision came after evaluating several factors, including the fund’s performance, liquidity, assets under management, and investor interest.

Notably, the decision comes exactly a week after the asset manager received approval from the US Securities and Exchange Commission (SEC) to list a spot Bitcoin exchange-traded fund (ETF).

VanEck said XBTF shareholders can continue selling their shares on the Cboe exchange until January 30, 2024.

“Shareholders who continue to hold shares of the Fund on the Fund’s liquidation date, which is expected to be on or about February 6, 2024, will receive a liquidating distribution of cash in the cash portion of their brokerage accounts equal to the amount of the net asset value of their shares,” the firm stated.

The shares will then be delisted with liquidation, which is expected to be completed by February 6, 2024. This means that proceeds from the liquidation will be scheduled and sent to shareholders by the aforementioned date.

Shareholders remaining invested at the time of liquidation will receive a cash distribution equivalent to their shares’ net asset value. VanEck advised shareholders to consult tax professionals, as they will generally owe capital gains tax on the difference between the liquidation proceeds and their original investment cost basis.

Launched in November 2021, the Bitcoin Strategy ETF may have failed to gain traction due to drawbacks inherent in Bitcoin futures-based funds. Critics argue such funds generally underperform simply holding bitcoin itself over the long run due to “contango” markets. In this market condition, futures contract prices rise above spot prices, indicating that traders and investors anticipate an increase in the underlying asset’s price in the future, compounded by increased costs and the extra complexity involved.

VanEck highlighted in risk disclosures that futures-based bitcoin funds can face a “significant negative impact” from contango. It also noted Bitcoin itself is extremely volatile, with prices subject to manipulation and flash crashes. Regulatory risks were also cited, as cryptocurrencies remain largely unregulated across much of the world.

“There may be risks posed by the lack of regulation for cryptocurrencies, and any future regulatory developments could affect the viability and expansion of the use of cryptocurrencies,” the disclosure states.

Established in 1955 with its ETF business launched in 2008, VanEck has consistently identified emerging trends and asset classes before they gain mainstream adoption. Over its decades of operation, the asset manager has over $89 billion in assets under management and has offered investment products across various emerging areas, such as gold and emerging markets.

With its legacy of bringing new investment products like gold funds and ETFs to market in past decades, VanEck leverages its experience and research capabilities. However, the recent closure of its Bitcoin Strategy ETF signals a setback in its efforts and initiatives in the crypto market.

Note: This story is developing. The Crypto Briefing editorial team will update this article as necessary to maintain veracity.