Investors interested in crypto can understand that they may have to wait a while before the crypto winter thaws, but it’s fair to say that the drama and FTX bankruptcy have rocked the industry. These investors might be interested in the idea of keeping their Bitcoin in “cold” storage via the Bitcoin futures ETF pairing of the ProShares Bitcoin Strategy ETF (BITO) and the ProShares Short Bitcoin Strategy ETF (BITI).
Bitcoin holders may not know what it means to place their exposures in “cold” storage, which involves trading in the Bitcoin futures market as an alternative to strategies that directly hold cryptocurrencies like Bitcoin or Ethereum. that trade at deep discounts to net asset value, according to Simeon Hyman, global investment strategist at ProShares.
BITO is currently trading at an average discount of -0.01%, while direct Bitcoin holder Grayscale Bitcoin Trust (GBTC) is trading at an average discount of -29.7%, suggesting that the futures market could be less exposed to the risk contagion that spreads from FTX. collapse.
BITO is creating capital appreciation primarily through its use of Bitcoin futures, having added $13.2 million in five-day net inflows. BITO saw its returns increase in the last month compared to the last three months, from -31.2% three-month to -13.9% one-month.
BITI, on the other hand, is looking for a return equal to -1x that of the S&P CME Bitcoin Futures Index for any given day. BITI also saw notable net inflows over the past five days, with $13.4 million over that period. The ETF is posting a 7.5% one-month return, with returns of 27.5% over the last three months.
With neither BITI nor BITO directly invested in Bitcoin, crypto investors who still believe in the long-term value of decentralized currencies and the power of blockchain might be interested in the appeal of a “cold” storage approach. If so, it might make sense to follow a Bitcoin futures ETF like BITO or its sibling BITI.
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