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Bitcoin Strategy ETF topped $ 1 billion in assets within two days.
Dreamstime
Investors will soon have a new tool to tip against
Bitcoin,
but it is better to make sure they are prepared for the risk.
ProShares said it will launch a short-Bitcoin futures exchange-traded fund called Short Bitcoin Strategy on Tuesday. The ETF, which wants the ticker BITI, seeks to track the inverse performance of the S&P CME Bitcoin Futures Index and will have a cost share of 0.95%.
The fund comes about eight months after ProShares launched
Bitcoin Strategy ETF
(BITO). This fund, which was the first long Bitcoin futures ETF, topped $ 1 billion in assets within two days.
The new fund may come at an appropriate time. In recent weeks, the crypto market has plunged into turmoil, with crypto banks freezing withdrawals, hedge fund collapses and firms announcing layoffs. Since the peak in November, Bitcoin’s price has fallen almost 70%.
“We all know that many people are bearish about the short-term or long-term outlook for Bitcoin or cryptocurrency in general,” said ProShares CEO Michael Sapir in an interview with Barrons.
Over the past week, ProShares’ long-standing Bitcoin fund assets have fallen to around $ 640 million, according to Morningstar.
Sapir said he expects the fund to be popular both among investors who believe Bitcoin will crash and among those who may still have a net long position on Bitcoin, but who want to secure the bet.
For ETF investors, the usual benefits and risks of a reverse ETF apply.
On the plus side, an inverse futures ETF can end up being cheaper and less risky than shorting Bitcoin directly on a stock exchange. Not all crypto exchanges even offer the ability to short the digital token, and those who do often require high margin fees. Also, if Bitcoin picks up again, an investor who shortens it directly may face potentially unlimited losses.
On the other hand, inverse ETFs are designed to track the opposite of index performance over just one day. In times of increased volatility, an investor who has such a fund for longer than a day may receive a worse return than they had expected. An investor sinking money into the ETF now will also come after the original cryptocurrency has already lost two-thirds of its value. Nothing stops it from falling further, but Bitcoin has been known to go on violent bullshit that can largely erase an investor’s position.
While the SEC has nodded to Bitcoin products based on futures, it has so far denied companies’ attempts to create ETFs related to the spot Bitcoin market, among other things with reference to potential manipulation of crypto platforms. Sapir in the interview said that he “sees no indication that regulators are ready to let a spot-based ETF come on the market in the near future,” adding that he felt the recent turmoil makes it even more unlikely.
So what can come next? In addition to Bitcoin futures, the commodity markets also already trade futures related to
Ether,
the second largest digital token. Although he did not confirm that ProShares would pursue Ether-linked ETFs, Sapir said: “It would certainly be an area we would be interested in and that we think investors would be interested in.”
Write to Joe Light at [email protected]
