In late June, the ProShares Short Bitcoin Strategy ETF (BITI) began trading. BITI is the first inverse or ‘short’ Bitcoin exchange-traded fund in the US. The purpose of this ETF is to give investors a way to profit if the price of Bitcoin falls.
The fund didn’t seem to be well received the first day it was available to investors, but in just its first nine days of trading, it grew its assets enough to make it the second-largest Bitcoin-focused ETF listed in the US. The largest is ProShares Bitcoin Strategy ETF (BITO), which has over $680 million in assets while BITI has just around $59 million in assets under management.
There is really nothing super special about BITI other than the fact that it is the first time investors can short Bitcoin with an exchange-traded product specifically designed to do just that task. However, the timing of BITI being released on the market is interesting, to say the least.
First, Bitcoin just wrapped up its worst month in the 12 years that it has been traded on exchanges. Yes, you read that correctly. June 2022 was the worst month Bitcoin has had in 12 years. Bitcoin lost 38% of its value in June. Let that sink in.
Since Bitcoin peaked in November of 2021 at $69,000, the cryptocurrency is now down around 71%. (This is not the worst decline Bitcoin has had; in 2018 during the last ‘crypto winter’ Bitcoin lost more than 80% of its value.
Furthermore, a recent report about Bank of America’s internal customer data shows that the number of active crypto users has dropped by 50%, from 1 million in November 2021, to below 500,000 in May 2022.
The price of Bitcoin and other major cryptocurrencies has been crushed lately, but so has the number of active users. These two numbers are likely interconnected, but also show that the public's interest in Bitcoin, and perhaps even other cryptocurrencies, is waning.
And lastly, the SEC just denied the application to convert the Grayscale Bitcoin Trust (GBTC) into a spot bitcoin ETF. Many believe that if and when the SEC allows a spot Bitcoin ETF, new investors will flood the markets since many believe the structure of a spot ETF is much better than a futures-based ETF.
This leads us back to the idea that the timing for the Bitcoin Short ETF was interesting, or just even straight bad. Now granted, ProShares filed with the Securities and Exchange Commission to offer this Bitcoin short ETF back in February 2022, but that doesn’t help the fact that it didn’t hit the market until after a lot of bad news and low prices have hit Bitcoin and the rest of the cryptocurrency industry.
If ProShares had come to market with the Bitcoin short ETF just a few months or even weeks prior, investors could have caught a wave of bad industry-wide news, like the collapse of a stablecoin and a number of crypto firms falling into financial troubles, needing cash infusions or announcing layoffs.
With Bitcoin down 71% from its peak, or 38% in just June alone, investors have to be asking themselves if the world's largest cryptocurrency has fallen too fast and/or too far.
How much more room does Bitcoin have to go? From $20k a coin to $10k? Maybe even $5k? Or have we seen the bottom at $17k?
It is hard to say where Bitcoin goes from here, especially in the short term. But it isn’t very easy to get short or go long an investment after it has already made a big move in that direction, such as getting short after it's already down 38% in a month and 71% since November.
With that all said, beggars can’t be choosers. We didn’t have a short Bitcoin ETF before, and now we do. So, while the timing may not have been ideal, it is good to know that some investors are already taking advantage of this opportunity.
But, more importantly for me, I like knowing that I now have a viable option to short Bitcoin if and/or when I may find the opportunity to do so.
Follow me on Twitter @mthalman5513
Disclosure: This contributor did not hold a position in any investment mentioned above at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.