ProShares’ new futures ETF to let investors bet against Bitcoin

abdelaziz Fathi

The first US inverse Bitcoin exchange-traded fund (ETF) will make its debut officially on the New York Stock Exchange.

The much-anticipated ETF from ProShares, which will give investors a way to profit from declines in the price of Bitcoin, will begin trading Tuesday under the ticker “BITI,” the provider of investment products said.

The inverse product, the ProShares Short Bitcoin Strategy ETF, will have an expense ratio of 0.95% and also track bitcoin futures. It will be based on daily investment results corresponding to the inverse of the return of the Chicago Mercantile Exchange Bitcoin Futures Contracts Index for a day.

Earlier in April, ProShares applied with the United States Securities and Exchange Commission for an investment vehicle that would allow users to essentially bet against bitcoin using an exchange-traded fund. The move came barely six months after the company introduced the first bitcoin futures ETF trading in the US. The latter was the first Bitcoin futures ETF to get listed on a US exchange and accumulated more than $1.5 billion in assets in less than a month of trading.

“As recent times have shown, bitcoin can drop in value. BITI affords investors who believe that the price of bitcoin will drop with an opportunity to potentially profit or to hedge their cryptocurrency holdings. BITI enables investors to conveniently obtain short exposure to bitcoin through buying an ETF in a traditional brokerage account,” ProShares CEO Michael Sapir said in a news release.

Following the US regulators’ reluctance to approve a spot bitcoin ETF, many applicants have turned their focus to products offering exposure to the crypto futures market, bitcoin miners, or companies hold crypto on their balance sheets.

SEC Chair Gary Gensler said that he would be open to approving a bitcoin-futures ETF, but only under certain conditions. The revelation rankled some fund managers who were hopeful of a physically backed ETF, but regulated like a normal exchange-traded fund under a 1933 law.

There are a number of applications underway to get a spot bitcoin ETF listed, but so far none have been approved by the SEC. The agency only extended the deliberation window or opened the matter to public comments to avoid reaching any decision on a proposal. Now, two approvals under the Securities Act of 1933 may potentially open the door or at least weakens the SEC’s argument to deny spot bitcoin ETFs.

ETFs that invest in futures contracts must continually roll forward the fund’s exposure as the contracts expire. Since issuers have to pay fees to do so along the way, the process eats into returns, causing the ETF’s performance to become unmoored from the underlying asset it tracks.

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