Record crash of the first Bitcoin futures ETF
Record crash of the first Bitcoin futures ETF
Bitcoin

Record crash of the first Bitcoin futures ETF

By Vincenzo Cacioppoli - 27 Oct 2022

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Just one year after the launch of ProShares’ first Bitcoin futures ETF, its drop was about $1.2 billion, an all-time record.

When just over a year ago ProShares launched the first futures-linked ETF tied to Bitcoin futures prices, the anticipation and curiosity around the rallying world of cryptocurrencies was so great that in just two days of listing, the ETF managed to surpass $1 billion in subscriptions, $1.1 billion in assets under management to be exact.

It was an all-time high for the ETF market. However, as mentioned, this was a different geological era in terms of the cryptocurrency sector and also for the economy in general than the current situation. The cryptocurrency market was rallying ready to break an all-time record high in prices, which led the capitalization of the entire market to exceed the monstrous figure of $3 trillion. Before long Bitcoin (which was trading at around $50,000 versus $19,000 now) hit its all-time high at over $69,000.

However, the industry crisis and market collapse that began in May this year, after the collapse of the Terra ecosystem and the subsequent bankruptcies of the 3AC fund and crypto lending companies, Voyager Digital and Celsius, hit heavily all Bitcoin and cryptocurrency-related products.

After the initial exploit, and after attracting an additional $1.8 billion, the ProShares fund then began to lose value, as was inevitable given the market slump, which resulted in across-the-board declines of more than 60-70% in the prices of almost all major cryptocurrencies (Bitcoin lost about 69%). 

Bitcoin futures ETF loses $1.2 billion in a year

Evidently, just as the cryptocurrency to which they are linked, Bitcoin futures are bound to break record after record, both positively and negatively. After setting the record for the most subscriptions in the shortest amount of time, it has also recorded the greatest loss in value in the shortest amount of time.

In just one year, the ProShares Bitcoin ETF has burned through a whopping $1.2 billion. In one year, the fund called BITO lost 70% of its value.

Bloomberg intelligence’s renowned ETF analyst James Seyffart said:

“It’s been a bad year — we’re looking at $1.2 billion burned,But if you just want exposure to Bitcoin, BITO is the best option in the ETF landscape, at least in the US.”

The long battle for spot ETFs

But the real battle being fought now is the one pitting the major crypto investment companies (including ProShares) against the SEC over approval of a first-of-its-kind ETF that invests directly in the underlying Bitcoin prices. SEC Chairman Gary Gensler considers spot futures products on Bitcoin to be too volatile and risky for investors, so he has so far decided to reject all of them.

Grayscale, which issues the leading Bitcoin investment fund, Grayscale Bitcoin Trust, which with its $12 billion in assets under management is the largest futures product by far, has decided to go on the counterattack, suing the SEC in a lawsuit after its new spot Bitcoin ETF was rejected.

Bitcoin futures too risky

At the same time, however, according to some analysts, the very performance of ProShares’ Bitcoin futures (as well as other similar ones issued later) shows how the market may not yet be ripe for products that are too speculative, such as a spot ETF on Bitcoin.

Nate Geraci, president of The ETF Store, a consulting firm, said:

“BITO is one of the most ill-timed ETF launches in history, with its debut nearly perfectly coinciding with the price of spot Bitcoin topping out,” said Nate Geraci, president of The ETF Store, an advisory firm. “The upside of that extremely poor timing is that the Bitcoin futures curve flattened out, minimizing the negative impact of rolling contracts every month.”

 

Vincenzo Cacioppoli

Vincenzo was born in Genova but lived most of his life in Milan. He has a degree in political science. He is a journalist, blogger, writer, and marketing and digital advertising expert. After a long experience in traditional marketing, he started working with the web and digital advertising in 2011, creating a company called Le enfants. Passionate about the web and innovation, in 2018 he started exploring the topics related to blockchain technology and cryptocurrencies. Independent cryptocurrency trader since March 2018, he now collaborates with companies in the sector as a content marketing specialist. In his blog. mediateccando.blogspot.com, he has long been primarily focused on blockchain, which he considers to be the greatest technological innovation after the Internet. His first book about blockchain and fintech is scheduled for release in November.

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