Investment Products Shorting Bitcoin See Record Entry

by James · September 6, 2022

Ethereum products see small outflows before the merger
Assets under management in crypto products fell to about $28 billion, the lowest level since early July

Despite continued low trading volumes and declining assets under management in crypto investment products overall, the money entering the burgeoning short bitcoin offering reached an all-time high.

Crypto investment products saw roughly $9 million in inflows last week, according to a Tuesday report from CoinShares, ending a three-week streak of outflows. The negative sentiment was highest in the US, which saw relatively flat flows masked by a record $18 million for products betting against bitcoin.

Short bitcoin investment products now have $158 million in assets under management — a new high — according to the report. The largest such fund is ProShares’ Short Bitcoin Strategy ETF (BITI), which was launched in June after bitcoin’s price fell below $20,000.

BITI was up 20% from a month ago, as of Tuesday at 11 a.m. ET, when bitcoin’s price was just above $19,800. The fund has about $90 million in assets under management, according to ETF.com.

Crypto investment products in Canada, Brazil, Switzerland and Germany had slightly higher inflows than those in the US.

“This follows the recent FOMC meeting in Jackson Hole where a much more hawkish view was expressed, unexpected by some investors,” CoinShares head of research James Butterfill said in the report.

Federal Reserve Chairman Jerome Powell said at the August 26 event that there is still a long way to go before sustained price stability is achieved. Some analysts are predicting another rate hike of 75 basis points this month.

Despite the addition of short bitcoin products, offerings focused on bitcoin and ether had about $11 million and $2 million in outflows, respectively.

Butterfill said last week that investors have apparently decided to wait for Ethereum’s upcoming merger — the blockchain’s transition from proof-of-work to proof-of-stake — before adding to positions.

Last week’s trading volume in crypto investment products hovered around $900 million, matching levels seen last week – the lowest since October 2020.

Recent price drops pushed assets under management in crypto products to about $28 billion, their lowest point since early July. Such offerings managed about $64 billion in assets at the start of the year.

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Ben Strack

Ben Strack is a Denver-based reporter covering macro and crypto-based funds, financial advisors, structured products, and the integration of digital assets and decentralized finance (DeFi) into traditional finance. Before joining Blockworks, he covered the asset management industry for Fund Intelligence and was a reporter and editor for various local Long Island newspapers. He graduated from the University of Maryland with a degree in journalism. Contact Ben via email at [email protected]