In the midst of the cryptoverse hype arising from President Donald Trump and First Lady Melania’s memecoins, some notable developments have stirred the pot. REX Shares and Osprey, prominent players in the financial space, have piqued curiosity as they initiate documentation for Exchange-Traded Funds (ETFs) related to some eminent cryptos, including TRUMP, BONK and DOGE.
Memecoins and Prominent Cryptos to Be Featured in New ETFs
As brought to light by renowned Bloomberg ETF expert, James Seyffart, ETFs for leading cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), Solana (SOL), and Ripple (XRP) are also in the pipeline. It’s worth noting that these assets are documented under the 1940 Act, similar to crypto futures ETFs, enabling them to hold a blend of derivatives and assets via a Cayman subsidiary.
Seyffart points out the similarity of this structural setup with strategies typically found in commodity ETFs. These type of strategies were created to reduce tax-related complications, especially avert the need for K-1 forms, notorious for complicating tax filings for investors.
The proposed new funds have set out to offer exposure to their corresponding reference assets through investment in a Cayman-based subsidiary – REX-Osprey™ TRUMP (Cayman) Portfolio S.P. This wholly-owned subsidiary is planned to hold no more than a quarter of the fund’s total assets. This strategy allows not just for diversified investment but also helps the fund meet the income sourcing stipulations outlined under the Internal Revenue Code.
Surge in Digital Assets ETF Filings – Anticipation of Continued Growth
This fund’s structural design is also labeled as “non-diversified” under the Investment Company Act of 1940, offering it more investment decision flexibility. That’s not all – the fund plans to allocate its remaining assets towards cash investments such as US Treasuries, money market funds, and other high-quality cash equivalents. These measures are designed to enrich liquidity and offer a protective cover for the fund’s investments.
The rise in such filings bears testimony to a broader trend in the cryptocurrency market. Eric Balchunas, Seyffart’s colleague, highlighted that crypto ETF filings submitted to the SEC have reached a significant number of 33.
This trend reflects a shift in the regulatory environment with filings doubling ever since Gary Gensler’s exit from the US Securities and Exchange Commission (SEC), and the anticipation that the figure could rocket to 50 in the foreseeable future.
However, Balchunas warns that the majority of investment capital is still expected to remain in spot Bitcoin ETFs, despite the exciting wave of new ETFs. He draws a comparison between the crypto market and the commodities sector, where gold rules supreme. In the crypto world, mainstays like Bitcoin and Ethereum are predicted to garner most investments, while memecoins may have to be satisfied with a more peripheral role according to the expert.
As of the writing of this article, TRUMP, the official memecoin of the President, was trading at $39,044, showing a decline of a whopping 50% from its peak of $79 over the weekend.
FAQs
What is the significance of new ETFs related to cryptocurrencies?
The introduction of new ETFs related to cryptocurrencies can create new investment avenues that could attract both institutional and retail investors towards cryptocurrencies. This could potentially enhance the liquidity and market cap of these cryptocurrencies.
What are the benefits of ETFs being filed under the 1940 Act?
ETFs filed under the 1940 Act are allowed to hold a mix of derivatives and assets through a subsidiary. This provides greater flexibility and creates an opportunity for diversified investment strategies, ultimately aiding the fund in fulfilling income sourcing requirements stipulated under the Internal Revenue Code.
What can be expected from the growth of digital asset ETF filings?
The rise in digital asset ETF filings signifies a broader acceptance of cryptocurrencies and could potentially lead to a larger investor base. However, experts caution prospective investors, suggesting that the majority of investment capital may still flow into established cryptos like Bitcoin and Ethereum, rather than new or niche cryptos.
What is the current state of the TRUMP memecoin?
At the time of this article, the TRUMP memecoin was trading at $39,044, down by 50% from a peak of $79 over the weekend. It should be noted that the value of cryptocurrencies can be extremely volatile and investing in them should be done with due diligence.
