Simplify Files with SEC for Bitcoin Strategy Crypto ETF

Asset management firm Simplify is seeking approval from the US Securities and Exchange Commission (SEC) for an exchange-traded fund linked to bitcoin derivatives.

According to the application, which provides details about the ‘Simplify Bitcoin Strategy Risk-Managed Income ETF,’ the new vehicle would not consist exclusively of bitcoin futures. Instead, if the fund is established, it would invest in sovereign debts and write options. It has a management fee of 85 basis points, the documents note.

Listed under the ticker symbol MAXI on Nasdaq, the proposed ETF comprises of a Bitcoin (BTC) futures strategy, an income strategy, and an option overlay strategy.

As part of its income strategy, the fund will hold short-dated U.S. Treasury paper and ETFs that mostly invest in Treasury securities. In terms of the option overlay strategy, MAXI will write call options and buy put options on bitcoin futures or related ETFs. Explaining the rationale behind this diversification, the company says it would reduce overall volatility and provide investors with exposure to bitcoin in a manner that is more efficient and less volatile than purchasing stand-alone bitcoin.

“The core option overlay is a strategic exposure meant to partially hedge against bitcoin futures declines and express convictions about price run-ups or about a specific bitcoin-linked ETF’s price movement,” said the filing.

Simplify Aims to Focused on Web 3.0

“If the price of bitcoin goes up, the Fund’s returns may underperform bitcoin because the adviser will buy back the written call options at a likely-higher price. If the price of bitcoin goes down, the Fund’s returns may fall less than bitcoin because the adviser will sell the put options at a likely-higher price or exercise the put options.”

To this point, the SEC has not approved any issuers’ plans for spot bitcoin or cryptocurrency ETFs. However, the regulator approved a slew of applications for BTC futures-related ETFs. As such, the process has become murkier even after nearly five years of debuting Bitcoin futures on Cboe and CME group.

So despite investor interest, it seems unlikely that the SEC would be comfortable using bitcoin as an underlying asset in a regulated investment vehicle any time soon.

Earlier in January, Simplify had filed with the SEC to list the shares of a Web 3.0 exchange-traded fund or ETF, the first of its kind. Named “The Simplify Volt Web3 ETF”, the fund aims to focus on Web 3.0, a decentralized version of the World Wide Web.