After huge demand for the spot Bitcoin ETF in the first two months of launch, Wall Street players like ProShares are coming up with new versions of this investment product.
By Bhushan Akolkar
Updated
3 mins read
Earlier this week on Tuesday, April 2, ProShares launched its Ultra Bitcoin ETF (ticker BITU) that will track 2x the daily performance of Bitcoin through the Bloomberg Bitcoin Index. The other product it launched is the ProShares UltraShort Bitcoin ETF (SBIT), which tracks exactly the inverse of this. As per ProShares, each of these products – BITU and SBIT – will have an expense ratio of 95 basis points.
The successful introduction of twelve Bitcoin ETFs directly investing in Bitcoin has attracted net inflows of $12 billion and amassed nearly $60 billion in assets. What sets these ProShares ETFs apart is their focus on providing amplified returns on spot Bitcoin, rather than the futures market. Speaking on the development, Michael O’Riordan, founding partner of Blackwater, an ETF consulting firm said:
“It demonstrates how ETF managers can be an opportunistic bunch by trying to leverage off the positive sentiment as much as possible”.
According to Michael Sapir, the CEO of ProShares, the leveraged BITU fund provides investors with the chance to pursue “amplified Bitcoin returns or target a level of exposure with less capital at risk.” Conversely, the UltraShort fund, SBIT, enables investors to aim for profits when the price of Bitcoin declines or to hedge their Bitcoin exposure.
The Bitcoin price volatility is driving a surge in demand for investment instruments offering leveraged and short exposure to the cryptocurrency. Over the last week, the BTC price has witnessed strong swings dropping over 10% from its all-time high of $74,458. Despite experiencing a 10% decline since reaching a peak in mid-March, Bitcoin’s value has risen by 54% since the beginning of the year.
The approval of spot Bitcoin ETFs by regulators has unleashed a wave of new products into the market, providing investors with more avenues to allocate capital to BTC. These offerings underscore the increasing desire among investors to gain exposure to the crypto market.
According to Matt Maley, the chief market strategist at Miller Tabak + Co, while the introduction of leveraged ETFs was anticipated, they may present both opportunities and risks for investors.
“On the negative side, it will likely lead to an increase in speculation in an asset class that is already volatile. However, they will also help investors hedge their positions. So, that could offset some of that speculation. Overall, it should continue to draw more investors into this asset class”, he stated.
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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
