Inverse Bitcoin

ProShares files for an inverse bitcoin ETF

ProShares has lodged a prospectus with the SEC for an inverse bitcoin futures ETF. The Short Bitcoin Strategy ETF, if allowed, would give investors a way to bet against the bitcoin price.

As with futures-based long bitcoin ETFs the fund would use CME bitcoin futures contracts to follow the inverse of bitcoin. ProShares would be hoping to follow up on the extreme success of the ProShares Bitcoin Strategy ETF (BITO). BITO, which launched in October, has maintained AUM of $1 billion-plus for the past six months, even as the bitcoin price has declined. Late entrants like VanEck and Valkyrie have been unable to claw any market share from BITO, showing the significance of first mover advantage. 

There was no ticker or management fee included in the prospectus.

It is unclear if the SEC will give an inverse bitcoin ETF a greenlight.

Bernie’s commentary – leveraged bitcoin; ProShares thematics pivot; 21Shares inverse bitcoin experience

There’s a lot to say about this filing. So I’ll proceed with bullet points.

• In Monday’s note we observed that ProShares was listing thematic ETFs at breakneck speed – nine in six months – and in such a way that almost seemed panicked. We now know why: the SEC has launched a consultation on leveraged and inverse ETFs. Gary Gensler really doesn’t like them and wants to change them. (Here’s Gensler’s letter).
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• There won’t be any leveraged bitcoin ETFs under Gensler. ProShares top competitor Direxion tried to launch a leveraged bitcoin ETF, but was forced to back down by the SEC. So my gut feel is that this filing will not get approved either.
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• A leveraged crypto ETF would be a good thing for the market and potentially a really good wealth accumulation tool. Have you ever seen the long-term performance of TQQQ? It’s up 10,000% since inception. Leveraged ETFs perform very well over the long term if they’re benchmarked against a solidly performing index. Sure they’re not perfect: there’s path-dependency, and the compounding of daily resets. But is gearing up to buy shares or crypto really that different to gearing up to buy property?
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• Even if an inverse bitcoin ETF is approved, I don’t think it’s likely to collect assets. 21Shares has one of these in Switzerland and after three years it sits on just $10M. Investors think crypto is only going one way.