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  • Grayscale applies for a covered call Bitcoin ETF

    Grayscale applies for a covered call Bitcoin ETF

    • Grayscale Investments files for covered call Bitcoin ETF post-SEC’s GBTC approval.
    • Covered call strategy leverages options on Grayscale Bitcoin Trust, targeting income.
    • Grayscale’s legal triumph shapes the evolving regulatory landscape for cryptocurrency.

    Cryptocurrency asset manager Grayscale Investments continues its strategic moves in the crypto market, recently applying for a covered call Bitcoin ETF.

    This comes hot on the heels of the successful launch of its spot Bitcoin ETF, the Grayscale Bitcoin Trust (GBTC). The move signifies Grayscale’s commitment to diversifying its offerings and expanding its presence in the cryptocurrency landscape.

    Grayscale continues crypto market forays

    Grayscale Investments’ bold move follows the approval of its spot Bitcoin ETF, GBTC, by the US Securities and Exchange Commission (SEC). The covered call ETF is designed to allow investors to generate income from options on Grayscale’s Bitcoin Trust.

    The Grayscale Bitcoin Trust Covered Call ETF will involve the strategic sale of call options, enhancing investor yield by combining asset purchases with option writing.

    The covered call strategy incorporated in Grayscale’s ETF suits investors anticipating minimal movement in the underlying Bitcoin price over the long term. Investors employing the covered call strategy often have a long-term asset retention plan while seeking to generate income through options trading.

    Grayscale’s move to introduce a covered call Bitcoin ETF aligns with the broader industry trend of expanding investment avenues in the cryptocurrency market.

    Background: Grayscale’s journey to Bitcoin ETFs

    Grayscale’s foray into the covered call ETF space comes on the heels of a complex regulatory journey. The asset management firm had initially faced hurdles when the SEC rejected its application to convert the existing Grayscale Bitcoin Trust into an ETF.

    However, a federal appeals court ruled in Grayscale’s favour in August 2023, prompting optimism and paving the way for the recent SEC approval.

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  • Asset manager Franklin Templeton applies to launch a spot Bitcoin ETF

    Asset manager Franklin Templeton applies to launch a spot Bitcoin ETF

    • Franklin Templeton joins other asset management firms like Grayscale that have applied to offer crypto ETFs.
    • The SEC was mandated by the court to evaluate Grayscale’s application to convert its Bitcoin futures ETF into a spot ETF.
    • Franklin Templeton will collaborate with CF Benchmarks to ensure accurate valuation.

    Franklin Templeton, a prominent asset management firm with $1.5 trillion in assets under management, has submitted an application to the United States Securities and Exchange Commission (SEC) seeking approval for the launch of a Bitcoin exchange-traded fund (ETF) that would track the price of Bitcoin in real-time.

    This move by Franklin Templeton follows a series of notable developments in the cryptocurrency ETF space. In late August, the SEC opted to delay its decisions regarding spot ETF applications from several other companies, including WisdomTree, Valkyrie, Fidelity, VanEck, Bitwise, and Invesco. Furthermore, a significant court ruling on August 29th mandated that the SEC must evaluate Grayscale’s application to convert its Bitcoin futures ETF into a spot ETF.

    Franklin Templeton’s ETF application

    In their application, Franklin Templeton outlines the structure of the proposed fund. It would function as a trust, with Coinbase serving as the custodian for Bitcoin holdings. Bank of New York Mellon would take on the roles of cash custodian and administrator. Fund shares are intended to be traded on the Cboe BZX Exchange, a major securities exchange in the United States. The SEC has set its next deadline for making a decision on this application for October 16th.

    In recognition of the regulatory uncertainties surrounding the digital asset market in the United States, Franklin Templeton explicitly acknowledges the risks in its application. They highlight the potential adverse impacts of legislative or regulatory developments, which could significantly affect the value of Bitcoin and the shares of the proposed ETF. Such impacts could include bans, restrictions, or imposing stringent conditions on various aspects of the cryptocurrency ecosystem, including trading, mining, digital wallets, custody services, and the overall operation of the Bitcoin network.

    CF Benchmarks and Franklin Templeton partnership

    To ensure accurate valuations, Franklin Templeton plans to collaborate with CF Benchmarks, a digital asset index provider regulated in the United Kingdom. CF Benchmarks would provide daily valuations based on data from reputable cryptocurrency exchanges, including Coinbase, Bitstamp, iBit, Kraken, Gemini, and LMAX Digital. These valuations would be updated at 5-minute intervals to reflect the real-time nature of the cryptocurrency market.

    At the time of writing, the price of Bitcoin was trading at $25,952.26, underlining the dynamic and ever-changing nature of the digital asset market that Franklin Templeton seeks to tap into with its proposed Bitcoin ETF.

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