ProShares Pitches Leveraged, Short ETFs to Curb Bitcoin Price Volatility

On Tuesday, April 2, earlier in the week, ProShares introduced two new ETFs: the UltraPro Bitcoin ETF (BITU), which aims to deliver double the daily returns of Bitcoin based on the Bloomberg Bitcoin Index, and the UltraShort Bitcoin ETF (SBIT), designed to provide the opposite effect, reflecting the inverse of Bitcoin’s daily performance. Both ETFs, BITU and SBIT, will carry an expense ratio of 0.95%.

Twelve Bitcoin ETFs, successfully launched by ProShares and investing directly in Bitcoin, have brought in $12 billion in new investments and accumulated around $60 billion in assets. What makes these ETFs unique is their goal to deliver increased returns based on the Bitcoin spot market, instead of using Bitcoin futures. Michael O’Riordan, co-founder of Blackwater, an ETF consulting firm, commented on this progress:

ETF managers can take advantage of favorable market conditions and heightened optimism to maximize their gains.

Michael Sapir, the CEO of ProShares, explains that the BITU leveraged fund allows investors to achieve magnified returns on Bitcoin investment or reach a desired level of exposure with smaller capital at risk. On the other hand, the SBIT UltraShort fund empowers investors to profit from falling Bitcoin prices or protect their Bitcoin investments from potential declines.

Curbing Bitcoin Price Volatility with New ETF Products

The unpredictable fluctuations in Bitcoin’s price are sparking increased interest in financial tools that let investors amplify or bet against its value. In just the past week, Bitcoin’s price saw significant drops, dipping more than 10% from its record high of $74,458. Despite these declines, which followed a peak in mid-March, Bitcoin has still gained nearly 54% in value since the start of the year.

Regulatory approval for Bitcoin spot ETFs has led to a flood of new investment opportunities in the market, allowing investors to diversify their funds in various ways and tap into the growing appeal of cryptocurrencies. These innovations serve as evidence of the surging interest among investors seeking to engage with the crypto sector.

Miller Tabak’s chief market strategist, Matt Maley, believes that the arrival of leveraged ETFs comes with potential benefits and drawbacks for investors.

He pointed out that on the downside, this situation might cause greater volatility in an already unstable asset class due to increased speculation. Yet, it could also provide investors with a way to protect their investments through hedging. Consequently, the potential for hedging may help mitigate some of the speculative activity. Ultimately, this development is expected to attract more investors to this volatile asset class.

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2024-04-03 12:18