DEFIANCE ETFS requested the regulatory approval of four new funds negotiated on the stock market (ETF), some of which include a long long (BTC) and Short Ethereum (ETH).
At May 6 deposit With the Securities and Exchange Commission of the United States (SEC) revealed the funds, which include Bitcoin vs Etf Etf, which is long BTC and ETH short; Ethereum vs Bitcoin Etf, which is a long eth and a short BTC; Bitcoin vs Gold Etf, which is long BTC and short gold; And the Gold vs Bitcoin Etf, which is a long gold and a short BTC.
As part of the Battleshares label, the classification structures each fund to follow the leveraged performance of an asset compared to another using derivatives. Each fund is actively managed and searches for total performance by synthetic exposure to underlying assets.
Target exposure generally varies from + 150% to + 220% for long positions and -150% to -220% for short positions.
Synthetic exposure to long bitcoin, court Ethereum
Rather than holding assets in cash, funds establish leverage exposure using a combination of term contracts, exchanges, options and FNBS listed in the United States or products negotiated in exchange (FTE).
According to the prospectus, the structure of the ETF aims to take advantage of the price differences between the pairs of long and short assets.
The investment thesis behind Bitcoin vs Ether ETF must generate yields when Bitcoin surpasses the ether during the period of detention. Conversely, the ETF Ether vs Bitcoin is intended for investors anticipating stronger performance of ether.
None of the FNBs invest directly in the assets they follow. Instead, they obtain an exposure using financial instruments issued by other derivative funds or markets.
If necessary, up to 25% of assets can be allocated to a subsidiary of the Cayman islands to maintain favorable American tax treatment under the rules of the regulated investment company (RIC).
The deposit adds that the derivative structure allows funds to avoid the risks of custody associated with direct assets of digital assets or physical gold.
However, this structure introduces additional complexity, including exposure to counterpart risk, tax constraints and high renewal due to frequent rebalancing.
High -level strategy and operational design
The funds are designed to be not diverse and will have a high portfolio turnover due to frequent rebalancing caused by market volatility, the momentum of the assets and the derivative expiration cycles.
The strategy consists in continuously adjusting exposure to maintain the target lever effect and the balance between the long and short paired positions.
Due to the lever effect, investors can see gains or amplified losses compared to underlying asset movements. Product documentation notes that performance is based on relative and non -absolute asset values, making ETFs unsuitable for directional exposure to a single asset.
The performance of the start of the year of the “Long Bitcoin, Short Ethereum” strategy would be very profitable for investors. At the time of the press, the BTC is up 1%, while the ETH is down almost 47% during the same period.
