ETFs closely pegged to the price of bitcoin served investors reasonably well as crypto proxies during a volatile week, even as losses for long-term holders continue to mount. The ProShares Bitcoin Strategy ETF (BITO) and the Short Bitcoin Strategy ETF (BITI) both saw their highest daily trading volumes last week. The small funds of Valkyrie and VanEck also experienced spikes in volume. All four funds saw moves slightly larger than the roughly 21% drop in spot bitcoin during the week. “It’s evidence of gaining exposure through futures, but it also indicates strong investor demand on both sides,” bullish and bearish, said global investment strategist Simeon Hyman. at ProShares, said about the performance of its company fund. Applications for a real spot bitcoin ETF have been consistently rejected by the SEC, but the agency has allowed bitcoin futures ETFs to launch. These futures are traded on the CME exchange, providing further reassurance to regulators. Bitcoin futures do not track spot bitcoin perfectly, and ETFs can incur additional costs for investors, such as the potential for rollover costs when the fund swaps expiring futures contracts for new ones. The ProShares short bitcoin futures ETF is also a daily inverse fund, which means that its performance is likely to diverge if held over a long period of time. However, bitcoin futures are also financially settled, meaning that no bitcoin changes hands or is held in an account. This reduces the risk that the actual bitcoin could be lost by an owner or misused by a counterparty, as appears to have happened with the FTX crypto exchange. “There were real core benefits to gaining exposure to bitcoin via futures…compared to the challenges one might face in gaining exposure using the exchanges, which just aren’t quite mature yet. “Hyman said. He added that the rolling costs of bitcoin futures contracts have fallen sharply since the launch of ETFs. The dramatic declines in the crypto raise long-term questions about the space, which had already sold off strongly since its peak late last year. The ProShares long-term fund is down around 75% since its October 2021 debut. of Terra in May, are hurting confidence in the industry. , driving users away and hurting liquidity for all aspects of crypto, including bitcoin futures. “The bitcoin bear market started almost a year ago and it’s mostly institutions selling assets; we believe retail investors are still holding onto their positions (on average at a loss). …Based on data on market participation over the past few years, bitcoin breakevens, and trading psychology, we believe retail investors could start selling if BTC trades below $10,000 said Sheena Shah, head of cryptocurrency research at Morgan Stanley, in a note to clients on Friday. . But Hyman said he doesn’t think the dramatic decline in crypto prices and the implosion of FTX “is the end of everything” and that the industry will continue to mature over time. “We should be looking a little beyond this week, and for those looking beyond, we believe we have a solution in place that has done its job this week,” offering exposure to bitcoin in both sense for many investors, Hyman said. – CNBC’s Michael Bloom contributed to this report.
Bitcoin, Ethereum Drop, Dogecoin Flat: Analyst Sees ‘Spike in Crypto Pessimism’ Ahead of ‘Fed Fireworks’ – Bitcoin (BTC/USD), Ethereum (ETH/USD), Dogecoin (DOGE /USD)