Digital currency investors have been under pressure this year due to a number of factors, from inflation and recession fears to a liquidity crisis among high-profile crypto companies. BitcoinThe steady freefall of K has brought the flagship coin down almost 70% from its all-time high last November.
For Investors Betting Against Bitcoin, ProShares Launches HappenThe first US short bitcoin-linked ETF on June 21.
“It’s mate bitoLong Bitcoin Strategy ETF,” Simeon Hyman, Global Investment Strategist at ProShares, said on CNBC ‘ETF Edge’ on Monday. “And we wanted to be able to offer investors less risk.”
The BITI S&P CME bitcoin futures index operates opposite (-1x), providing a potential profit opportunity from its decline. The ETF is tied to bitcoin futures contracts and is rebalanced every day.
“What we have seen with the volatility of bitcoin over the past several months is more and more challenges in the spot market,” Hyman said.
Unlike the spot market, futures have matured this year, he explained. This means that the roll cost that investors were worried about has shrunk.
“Advisors are interested in crypto ETFs because they can place them on the platform that manages their clients,” Tom Lydon, Vice President of WaitaFi, told CNBC. bob pisani Monday on ETF Edge.
Lydon sees the upside with BITI partly because of its flexibility. Investors are not required to have an options, margin or futures account, and there is no need to monitor or maintain margin levels. In addition, investors do not have to worry about losing anything more than their investment.
“Now with the fact that we have ETFs, they are available on the platform, and [now that] We have significantly reduced the value of ETFs, with more advisors joining in,” Lydon said.
The fee for BITI is .95%, but Hyman explained that financing costs and restrictions on shorting bitcoin make ETFs a less expensive route to exposure.
“It’s hard to pull off,” Hyman said. “If you go on margin in a brokerage account, the cost of borrowing is closer to 20%.”
June was bitcoin’s worst month on record, losing more than 38% of its value in the period alone. The digital currency remained under pressure while falling below $19,000 over the past week. It costs up to $18,000 to make one bitcoin.
But despite investor concerns last year that there would be too much variation between the spot market and the futures market, the correlation between bitcoin and futures remains tight.
“The futures market is something the ETF industry has been a part of for a long time,” Lydon said. “You’ve got the plumbing down, the market makers and authorized participants are all doing what they need to do. It was up to them to make sure they performed – that those spreads are tight, and that the correlation is accurate.”