Betting against bitcoin
ProShares has launched the first American inverse bitcoin ETF, providing a way for Americans to place downbeat wagers on the largest cryptocurrency.
ProShares Short Bitcoin Strategy ETF (BITI) will short sell bitcoin futures contracts listed in Chicago, in this respect it will be quite different to the European short bitcoin ETFs which short sell actual bitcoins.
Like all inverse ETFs, the fund will only provide its exposure for one day. If held for longer periods it will diverge from an outright short at time of entry.
The fund charges a management fee of 0.95%, however that excludes the potential roll costs.
Bernie’s commentary – beautiful timing
I really love the timing of ProShares ETF launches. They launched a long bitcoin ETF last year in November, at the top of the market. Traders correctly anticipated that the first American bitcoin ETF would create surging demand for bitcoin futures, so they front-ran ProShares launch, jacking up the price of bitcoin futures.
BITO is down 68% since inception, meaning it must triple in value just to get back to its launch price. It’s also underperformed the bitcoin spot price, and by more than just its management fee. What a zinger.
And now ProShares is launching an inverse bitcoin ETF, potentially at the bottom of the market this time. As rising interest rate panic causes risk assets - and in fact all assets - to get sold off en masse.
While the timing may not be great either way, I suspect there will be a market for the inverse ETF all the same This is because there’s countless people out there who think bitcoin is a Ponzi scheme, destined to go to zero. And the advantage of an ETF like this is that you can only lose money that you put in - unlike outright short selling, where you can lose more than you have.
