NEW YORK (June 21): Crypt bears who assume the digital currency slump isn’t over yet get a new tool to bet on new slumps.
Launching on Tuesday, the ProShares Short Bitcoin Strategy ETF (Ticker BITI) became the first exchange-traded investment fund (ETF) in the United States to be associated with the largest cryptocurrency. By reversing the performance of the Bitcoin futures index, it seeks to provide a relatively cheap and easy way to profit from further losses.
BITI comes as the virtual currency complex is in turmoil with selling digital assets amid a rising inflation rate due to the Federal Reserve’s rate hike over the past week. It’s a spiral that has longtime holders selling, and Bitcoin is down about 70% since its peak in November.
This increases the risk that the new fund missed most of the drawdown. ProShares’ bet is that facilitating bitcoin shorting will encourage more investors to voice their negative views of the crypto.
“We believe there are many investors who are bearish on bitcoin and cryptocurrencies in general in the short or long term and who they believe have not traded because it was too difficult or too expensive,” said Michael Sapir, CEO of ProShares. via phone. “These investors will be able to get short exposure to bitcoin as easily as buying ETFs in a traditional brokerage account.”
ProShares was also behind October’s first US bitcoin-related ETF, the Bitcoin Strategy ETF (BITO). It had one of the biggest launches in ETF history, but its debut proved to be around the peak of the digital asset boom.
BITI charges a cost rate of 0.95%, which is the BITO cost rate. Though higher than most actively managed funds, the spot rate on BITO stock — a measure of the fund’s shorting cost — currently stands at nearly 13.9%, according to data compiled by S3 Partners.
The catch is that the new product, like most inverse ETFs, is intended for short-term use only. It returns the inverse performance of its base index every day, meaning it effectively renews itself every day. Investors who hold the ETF for an extended period therefore risk underperforming due to its ongoing costs.
ProShares is the first bearish bitcoin ETF to launch, with similar filings from rivals Direxion and AXS still in the pipeline. Direxion applied for such a fund in October following the launch of BITO, but withdrew the application at the request of US regulators.