ProShares will introduce the first short bitcoin exchange traded instrument in the United States today, giving investors a new way to profit on the digital token’s continued sell-off.
ProShares’ decision comes as bitcoin’s price has dropped over 70% to $20,500 from its all-time high in November.
The move contrasts sharply with the heady days of October 2021, when ProShares was the first to market with a long bitcoin futures ETF in the United States. In one of the hottest ETF debuts of all time, the ProShares Bitcoin Strategy ETF (BITO) surpassed $1 billion in assets in just two days.
Bitcoin’s decline is just one strand in a larger carnage in cryptocurrencies and other digital assets like non-fungible tokens.
According to data from TrackInsight, the total global assets under management of crypto exchange traded products has dropped 54% from a peak of $19.5 billion in November to $8.9 billion.
“We are confident that there will be interest in the fund, especially considering what has happened in the market in recent months, particularly in the past week,” said Michael Sapir, CEO of ProShares, which manages $62 billion in assets.
The ProShares Short Bitcoin Strategy ETF (BITI), like BITO, will trade in Chicago Mercantile Exchange futures contracts rather than the “real” bitcoin itself.
It is meant to provide inverse exposure to the daily return of bitcoin, less fees and costs, and is likely to diverge from this if held for extended periods of time, as with any inverse ETFs.
As a result, it will be structured similarly to Horizon ETFs’ C$44 million ($34 million) BetaPro Inverse Bitcoin ETF (BITI), which debuted on the Toronto Stock Exchange in April 2021 and has returned 142% from its November lows.
The only other inverse ETP (Exchange traded products ) is the $21.6 million 21Shares Short Bitcoin ETP (SBTC), which creates short exposure by borrowing bitcoin and selling it on an exchange. Since November, it has returned 127 percent.
ProShares’ ETF will be less expensive than any of the existing offerings, with a 0.95 percent management charge on top of the “roll expenses” inherent in futures trading. In addition, a sister mutual fund will be launched.
Short exposures are available on several cryptocurrency exchanges, but they require the creation of an account, the establishment of margin, and the risk for significant fees. Another alternative for investors is to directly trade futures contracts.
Despite the chaos in the cryptocurrency market, ETP investors do not appear to be ready to give up. According to TrackInsight, net inflows to the sector have been positive for the past four weeks, totaling $507 million.
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