VanEck's Decision to Close Bitcoin Strategy ETF Follows Spot ETF Approval

VanEck Abandons Futures ETF

In a Wednesday statement, VanEck's Board of Trustees greenlit the liquidation of the VanEck Bitcoin (BTC) Strategy ETF (ticker: XBTF) from the Chicago Board Options Exchange (CBOE). The decision was based on a comprehensive evaluation of the fund's "performance, liquidity, assets under management, and investor interest."

According to Yahoo Finance data, XBTF sees an average daily trading volume of $1.4 million. This lags significantly behind its competitor, the ProShares Bitcoin Strategy ETF (BITO), which dominated inflows and volume since its October 2021 launch. VanEck's XBTF entered the market on November 15, 2021.

Bloomberg ETF analyst James Seyffart notes that the ETF industry tends to favor the "winner take most" scenario, with the first movers receiving the majority of volumes. The challenge for early buyers of less popular funds lies in selling their shares as large investors gravitate towards higher-volume ETFs.

To alleviate this, VanEck has committed to providing investors with cash distributions equivalent to the net asset value of their shares after the fund's liquidation. The scheduled liquidation date is February 6.

"For tax purposes, shareholders will generally recognize a capital gain or loss equal to the amount received for their shares over their adjusted basis in such shares," the company clarified.

VanEck's Venture into Bitcoin Spot ETF

In the preceding week, VanEck, along with other fund managers, secured approval for its Bitcoin spot ETF, distinguishing itself by backing its shares with actual BTC.

Unlike the competitive landscape of Bitcoin futures ETFs in 2021, all spot ETFs were afforded an equal opportunity for market share accrual through a simultaneous launch. VanEck's Bitcoin Trust (HODL) positioned itself in the middle tier for flows and volume, accumulating $51 million in volume and $17.9 million in flows over its initial three days.

As a gesture, VanEck has pledged to donate 5% of the profits generated by its ETF product to Bitcoin core developers.