ProShares – the leading Bitcoin ETF provider in the United States – has announced that it will launch the country’s first short-linked Bitcoin ETF on Tuesday. This will allow investors to gain short exposure to the leading cryptocurrency, effectively betting against the asset’s performance.
Hedging Against Bitcoin
In a press release from ProShares, the Bethesda MD firm’s fund will let investors potentially profit from Bitcoin’s decline. However, it will come with the convenience of an ETF, avoiding the traditionally “onerous and expensive” challenges of gaining short exposure to cryptocurrency.
A “short” is a type of futures agreement to sell a given asset or commodity at a pre-determined price, on a future date. With futures contracts, one can ensure he nets a reliable return on his sales in the future, even amid unforeseen market circumstances.
However, many futures contracts are cash-settled, meaning they ultimately amount to bets on price. In other words, short-sellers simply debit or credit their buyer the difference between the initial price and final settlement, rather than delivering the actual asset.
The new fund, which will be listed under the ticker BITI on the NYSE, will deliver inverse performance from the S&P CME Bitcoin Futures Index. ProShares CEO Michael L. Sapir believes that recent events have proven the type of benefit a short-based ETF can provide.
“BITI affords investors who believe that the price of bitcoin will drop with an opportunity to potentially profit or to hedge their cryptocurrency holdings,” he said.
ProShares will also launch the Short Bitcoin Strategy ProFund (BITIX) on Tuesday – a mutual fund with the same investment objective as BITI.
Still No Spot ETF
ProShares is known for having launched the first Bitcoin ETF in the United States, which was based on futures contracts. Many other ETFs based on Bitcoin derivatives have launched in the U.S. to date, but none are based on direct Bitcoin exposure.
Many Bitcoiners have shown disappointment with the Securities and Exchange Commission (SEC)’s reluctance to approve such a product, with some even smelling foul play.
“So there’s now a SHORT Bitcoin ETF, a Futures ETF, a closed end fund trading at a 30%+ discount, a 401K option for Bitcoin, but NO Spot ETF,” tweeted Will Clemente – lead insights analyst at Blockware – on Monday. “It is clear that Gary Gensler and the SEC have an agenda against Bitcoin.”
Grayscale – the world’s largest Bitcoin fund – is currently attempting to transition its product into an ETF. If the SEC rejects its next application, CEO Michael Sonnenshein has threatened to sue the commission for unequal legal treatment.