Demand For The First Short Bitcoin ETF Heats Up

After a slow start, the first short Bitcoin ETF nearly quadrupled its trading volume during the second day.

The first “short Bitcoin” strategy fund, the ProShares Short Bitcoin Strategy ETF (NYSE:BITI), saw a massive surge on the second day after a lackluster debut on the NYSE. The fund, which enables market participants to bet against the price of Bitcoin, traded more than 870,000 shares (worth $35 million) on Wednesday, up by around 380% compared to its first trading day.

The First Short Bitcoin Fund

ProShares, a premier provider of exchange-traded funds (ETFs), has launched the BITI this week, the first fund to enable investors to bet against the price of the leading cryptocurrency. BITI is a futures-based exchange-traded fund seeking to inversely track the performance of the S&P CME Bitcoin Futures Index.

The fund was listed on the NYSE Tuesday and had a slow start with a trading volume of just 183,300 shares, which was “less than 1% of the volume $BITO had at this time on Day One,” according to Eric Balchunas, ETF analyst at Bloomberg. “Not surprising, given the exotic form of exposure and the recent dud spot bitcoin launches in Australia,” he added.

However, interest in BITI nearly quadrupled during the second trading day. According to Yahoo Finance, the fund’s trading volume soared to 886,200 shares, worth about $36.2 million, on Wednesday.

ProShares CEO Michael Sapir said the surge in trading volume suggests that there is demand for such products. “The reception that BITI is getting in the market affirms investor demand for a convenient and cost-effective ETF to potentially profit or hedge their cryptocurrency holdings when bitcoin drops in value,” he said.

ProShares was also the first firm to introduce a Bitcoin ETF October 2021. The fund, which trades under the ticker BITO, attracted over $1 billion in inflows on its first trading day, becoming the first Asset Under Management (AUM) to achieve this feat.

Is BITI the Right Option for Investors?

Acquiring short exposure to Bitcoin with traditional methods can be pretty costly and onerous for many investors. That is because the majority of crypto exchanges have strict restrictions that make it challenging to short spot Bitcoin. Moreover, the financing costs can reach between 5% and 20%.

On the other hand, BITI, which charges an expense ratio of 0.95%, can be a more cost-efficient approach to betting against Bitcoin. However, it is worth noting that BITI seeks to obtain exposure through bitcoin futures contracts, thus it can be very complicated. The fund can also underperform spot prices.

The same was true about BITO, the long Bitcoin ETF. As reported, experts believe that the Bitcoin futures ETF would underperform spot prices by 8.4% annually in the longer term. There is also the risk of “contango bleed” for future ETFs, which can offer enormous losses.

Meanwhile, Bitcoin has been hovering around $20,000 for the last couple of days. The coin is currently trading at $20,700, largely flat over the past 24 hours. Notably, the coin is down by more than 70% compared to its all-time high.