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1) Empowered Funds Files for the Return on Character ETF

SEC Filings  |  10/18/2021

Because… We are featuring Return on Character ETF this week because it presents a good case for questionable investing themes. According to the fund’s filing, “behavioral interviews with CEO’s close professional colleagues, third-party analysts, and other personnel are designed to evaluate how the CEO responded in specific situations, which is then used to extrapolate how the CEO may perform in the future.” First, these behavioral assessments can be based on highly subjective judgment. Second, a CEO’s previous response to a particular situation may not be a good indication of their future actions because people learn from prior experiences and develop new ways of thinking over time. Leaders may not resort to old methods when dealing with new issues. Third, how can first-time CEOs be evaluated if there are no academic research, press coverage, or public speeches on them that can be used as valid sources to determine their Integrity Scores? Fourth, while CEOs’ vision, skills, focus, and dedication are important in shaping the direction and culture of a business, they are not the only key drivers to the business’ success. Other factors, such as the market potential and competitive forces, also play a role in business growth and profitability. With that said, we wish the fund best of luck!


2) ProShares to Launch the First U.S. Bitcoin-Linked ETF on October 19

ProShares  |  10/18/2021

Because… After years of delays, the long-awaited regulatory approval of a cryptocurrency-linked ETF finally arrived. ProShares Bitcoin Strategy ETF (BITO), which wasted no time after getting the SEC’s greenlight on Friday, caused a big sensation on its first trading day. Bloomberg reported that more than 24 million shares changed hands with over $1 billion of trading volume, making it the second most heavily traded new ETF. The fund ended the day with $570 million of assets and became the fastest ETF in history to hit $1 billion in just two days. The firm also introduced the first Bitcoin Strategy mutual fund in July, which only amassed $14.6 million after three months. While BITO is not the first bitcoin ETF in the world, the title of the first in the U.S. was enough to attract attention from investors, who disregarded the facts that the fund only provides access to bitcoin futures contracts and it has a relatively high expense ratio of 0.95%. The Canada-based Purpose Bitcoin ETF, which claims to be the world’s first physically settled bitcoin ETF, accumulated $1.5 billion of assets since its February inception. We expect BITO to surpass its assets in a matter of days.

3) NYSE Arca Files Form 19b-4 to Convert Grayscale Bitcoin Trust into an ETF

GlobeNewswire  |  10/19/2021

Because… The bitcoin price, after plunging below $30,000 in July, rebounded to an all-time high of more than $66,000 on October 20, 2021. It was projected by Fidelity to head for $100,000 by 2023. The price surge, along with the advent of the first bitcoin ETF, may have provoked Grayscale to make the move of converting its Bitcoin Trust (GBTC) into a Bitcoin spot ETF, though the plan was first revealed in April. GBTC, with assets of $42.3 billion, is the world’s largest Bitcoin fund, holding approximately 3.44% of all Bitcoin in circulation. Grayscale is hoping that the regulator would become more comfortable with physically-backed bitcoin funds after approving futures-based ETFs. GBTC has been trading at a steep discount to its net asset value since February. If the SEC grants an approval, the fund will change from a grantor trust to an ETF structure, which will allow it to create and redeem shares to keep its value as close as possible to the actual bitcoin price. We also expect Grayscale to cut GBTC’s 2% fee to a much lower expense ratio in order to stay competitive and maintain its dominance.