ProShares unveils the first ETF to short Bitcoin (BTC). The community has expressed concerns about the potential for further declines in the price of Bitcoin
ProShares’ BITI allows to short BTC
In a bear market, ProShares today issued the first exchange-traded fund (ETF) to short the price of Bitcoin (BTC). Michael Sapir, CEO of ProShares, believes that this novelty will offer an additional tool in the strategy of investors: “
As we know, Bitcoin can lose value. BITI gives investors, who believe that the price of Bitcoin will fall, an opportunity to potentially profit or hedge their cryptocurrency holdings. “
The announcement of this ETF, answering to the name BITI has caused concern within the crypto community. Indeed, with the fall of the prices, the arrival of an investment vehicle potentially allowing to increase this fall has what to question.
However, it is worth remembering that the arrival of BITO, the first Securities and Exchange Commission (SEC) approved Bitcoin ETF, also issued by ProShares, promised the exact opposite. However, while this had a positive effect for a few weeks, it did not prevent the price from entering a downward trend within a month:
BTC price evolution since the arrival of the BITO ETF
This example shows that whatever the short term impact, it will not have a lasting impact on the price in the longer term.
Functioning of the ETF
The ProShares BITI is specifically designed to short the CME Bitcoin Futures Index, not the spot price of BTC. Thus, as with any futures contract, a slight lag may occur compared to the actual price of the asset. A spot ETF would therefore be indexed to the price of a real BTC.
The reference price of the ProShares ETF is recalculated every day and operates without leverage, applying a -1 x coefficient. This means that if the BTC price gains 10%, the BITI loses that value proportionally and vice versa.
In parallel, we can note that the SEC has still not given approval for any spot ETF on Bitcoin. On the other hand, BITI could be an interesting alternative for investors who are not familiar with our ecosystem. On the other hand, the more experienced investors already have the necessary tools to short the market in a more efficient way than with an ETF.
