ProShares will introduce a short-term bitcoin futures exchange-traded fund on the New York Stock Exchange tomorrow to track the reversal behavior of the S&P CME Bitcoin Futures Index.
The new Short Bitcoin Strategy ETF comes as the world’s biggest cryptocurrency flirts with levels not seen since 2020. Additionally, a wider crypto market route has left many participants in decentralized finance out in the cold.
With bitcoin down 70% from November’s peak, the CEO of Bethesda, MD, the firm that launched the ProShares Bitcoin Strategy ETF in October last year, believes this is the ideal scenario for their new product. “We all know that there are many people who are bearish about the short-term or long-term prospects of bitcoin or cryptocurrencies in general,” Michael Sapir told Barons. The new short-bitcoin ETF will operate under the ticker symbol BITI and is expected to lead to those betting on the demise of bitcoin and those with long positions in bitcoin looking to hedge.
Concerns about tracking errors dismissed
The launch of the ProShares Bitcoin Strategy ETF followed an eight-year push to launch an ETF directly tracking the price of bitcoin. The Securities and Exchange Commission considers spot ETFs too risky due to the risk of fraud and market manipulation, and has yet to approve such a product, despite fierce lobbying from digital asset heavyweight Grayscale, including threats of potential lawsuits.
Discrepancies between the futures market and tracked assets are a downside with futures ETFs, especially given the volatility of bitcoin. The ProShares Bitcoin Strategy ETF currently has approximately $640 million in assets, down from around $1 billion at its inception.
However, Sapir remains optimistic. “Based on how the futures market is tracking the spot market, we believe the inverse product will track well as well,” he told the Wall Street Journal.
Market volatility can cause huge losses
While betting against bitcoin’s performance in this current bear market appears tantalizing, it’s worth remembering that inverse ETFs track performance daily, and a long-term investor can experience significant losses. Investors will also join the market after bitcoin fell from its rare highs in November last year without any certainty that the market will continue its bearish trend. The risk of major losses is still in the shadows, considering the possibility of a bull run with the peak price falling below $70K.
While SEC Chairman Gary Gensler has voiced support for ETFs trading bitcoin futures, the SEC still recommends caution when investing.
“Before investing in a fund that holds bitcoin futures contracts, make sure you carefully weigh the potential risks and benefits,” tweeted this In October last year.
Sapir said he sees no signs of the SEC approving the Bitcoin Spot ETF any time soon. They also issued the prospect of an Ethereum-linked ETF in ProShares’ future, despite opting out of an SEC filing last year.
According to Coingecko, Ethereum is turning to $1127, which is about 77% less than its peak in November 2021.
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