With the collapse of the crypto market, led primarily by Bitcoin, more investors are looking for ways to protect their positions.
Others, however, who turn out to be more savvy, are looking for tools that will allow them to speculate bearishly.
Volumes on the ProShares Short Bitcoin Strategy ETF grow 300%.
This is precisely why financial products of this kind manage to meet demand and satisfy the current need of traders.
This is confirmed by the trading volumes on the ProShare Bitcoin Short ETF, which have increased by more than 300% in the last week alone.
The news is reported on Twitter by the news aggregator account in the crypto world, Bitcoin Archive:
💥JUST IN: ProShares #Bitcoin Short ETF grew +300% last week. 🤨
— Bitcoin Archive 🗄🚀🌔 (@BTC_Archive) July 7, 2022
As is often the case, investors have a delayed response to market conditions, given also the wide variety of divergent expectations present among traders.
Indeed, this was the natural reaction to one of the biggest crypto winters in history. Although the market has already lost more than 70%, the fear remains that the slump may not be over. Therefore, investors, especially retail investors, are running for cover, both to possibly hedge against further declines and to try to recoup their losses by betting on the downside.
How does the ETF work
The ProShares Short Bitcoin Strategy ETF, BITI for short, is based on the returns generated by the benchmark used as underlying, the S&P CME Bitcoin Futures Index. This means that the fund does not invest directly in “physical” Bitcoin, but is linked to it through exposure placed on the benchmark index.
The ETF is constructed in such a way as to generate a -1x return relative to the benchmark, so investors can gain when the value of Bitcoin falls.
Simply put, the fund strives to provide an opposite return to that of the underlying asset, represented by an index with exposure to futures on the spot price of Bitcoin.
So, if the price of Bitcoin goes up, the value of the index also goes up, while that of the ETF should move proportionally, but in the opposite direction, and vice versa.
In fact, the ETF prospectus states that the performance of the underlying futures contracts should be highly correlated with the daily BTC spot price.
There are several advantages to using this instrument, if one wants to bet on the downside. The opportunities certainly relate to easier management and investment of the product compared to leveraged derivatives. As a result, investing in this ETF makes it possible to reduce risk and avoid the significant fees and costs involved in shorting Bitcoin, all in a more liquid form.