Short Bitcoin ETF: Is BITI a good hedge against the crypto winter?

Short Bitcoin ETF: Is BITI a good hedge against the crypto winter?

Additional comments:

BITI is designed to give investors a way to profit from declines in the price of Bitcoin. It is the first U.S. fund of its kind. On hearing this before the launch, I know many naysayers were piling into this ETF to short Bitcoin. This also resulted that this vehicle is now the second-largest bitcoin-themed ETF (behind BITO) in the U.S. market with just a few days of trading.

The challenge with a short ETF is timing the market. At this moment of time, I think this ETF started off slower than expected as Bitcoin started climbing back to over $21,000. If they were to be launched in November when Bitcoin hits its all-time high at $69,000, then perhaps you will see more influx of investors jumping in.

Analysts also told me that if investors also bought into BITO and BITI, and if you time right to follow the market’s momentum, you will still be a winner. I agree and disagree with this strategy as timing is the key factor to this.

I have always thought that a spot-based Bitcoin ETF product will be launched first. By seeing another derivatives products launched before the spot-based product, this reinforces my thinking further. I think the regulators are worried about subscriptions of the spot product because they know it will be popular. That is why they approved futures-based ETF, thinking that most risk-conscious investors are unlikely to buy the futures-products. Well, based on the trading figures, I still think the demand is there and it is rising.

Will history repeat itself? Only time will tell.

 

Short Bitcoin ETF: Is BITI a good hedge against the crypto winter?

ProShares has launched another bitcoin-linked exchange-traded fund (ETF). This new instrument is shorting the coin amid the wider cryptocurrency bear market.

The ETF issuer previously launched a bitcoin futures ETF BITO when the cryptocurrency was enjoying record highs and risk-on sentiment was prevailing.

Both funds trade futures contracts on the Chicago Mercantile Exchange (CME). The difference is only between their short and long positions.

What is a short bitcoin ETF, and what is the long-term sentiment on its performance?

What is ProShares bitcoin ETF?

An exchange-traded fund (ETF) is a basket of securities that tracks an underlying index or instrument, if it’s passive, or it could be actively managed with fund managers picking stocks based on their analysis and financial modelling. ETF prices fluctuate throughout a trading session as they are sold and bought on an exchange.

ETFs typically contain bonds and stocks but more recently have ventured into cryptocurrency territory. Cryptocurrency ETFs were highly anticipated by the community as they aim to boost liquidity and the adoption of digital assets in the world of investing.

In order for an ETF to be established, the company willing to create a fund must file a proposal with the US Securities and Exchange Commission (SEC).

A bitcoin ETF is made up of bitcoin or instruments linked to its price. How does it work?

In theory, bitcoin tokens would have been purchased by the company that owns the fund, securitised and sold or traded on an exchange. But, the SEC is yet to accept such a proposal. The underlying assets in bitcoin ETFs are linked to bitcoin futures contracts traded on the CME.

A futures contract is a standard contract where two parties agree to exchange a specific quantity of assets on a specific day for a certain price. A bitcoin futures contract is an agreement between two sides for the exchange of a contract unit of bitcoin.

Bitcoin short ETF explained

Similarly to BITO, the ProShares Short Bitcoin Strategy ETF, BITI, trades in futures contracts on the CME. The difference is that BITI is a short bitcoin ETF, meaning that it trades short positions. BITI allows investors to profit from the falling price of the cryptocurrency, which could be used as a part of a hedging strategy.

“BITI affords investors who believe that the price of bitcoin will drop with an opportunity to potentially profit or to hedge their cryptocurrency holdings. BITI enables investors to conveniently obtain short exposure to bitcoin through buying an ETF in a traditional brokerage account,”  ProShares CEO Michael L. Sapir said in a statement on 20 June 2022.

The fund tracks the nearest maturing monthly bitcoin futures contract trading on CME and is a rolling index, meaning that the index operates in accordance with a set of predetermined rolling methodology. In BITI’s case, the roll occurs over a five-day period every month, effective prior to the opening of trading and preceding the last trading date of the futures contract.

The last trading date for bitcoin futures contracts is the last Friday of the contract month. The index rolls monthly and distributes the weights 20% each day over a five-day roll period.

BITO has a gross expense ratio of 0.97% and a net expense ratio of 0.95%.

Are you wondering how to buy short bitcoin ETF? As ETFs are bought and sold on an exchange, bitcoin ETFs can be purchased via online brokers and most trading platforms.

For those investors who prefer to put their money in a mutual fund, which trades only once a day,  ProShares’ affiliate mutual fund company launched a Short Bitcoin Strategy ProFund (BITIX), which has the same investment objective as BITI.

“With the additions of BITI and BITIX, ProShares and ProFunds will be the only fund families in the US offering funds that allow investors to express their view on the direction of bitcoin—no matter whether they believe the price will go up or down,” Sapir noted.

Short BTC ETF analysis

It is important to note that investing in a futures-based bitcoin ETF is not a direct investment in the cryptocurrency because the fund tracks CME BTC futures – contracts speculating on the future price of BTC rather than bitcoin itself. Investors should be aware that the price of the ETF could be different to the price of the cryptocurrency itself.

The introduction of the new short bitcoin ETF had “many naysayers were piling into [it] to short bitcoin”, said Anndy Lian, best-selling author of Blockchain Revolution 2030 and chief digital advisor to the Mongolian Productivity Organisation.

What is your sentiment on BTC/USD?

“This also resulted that this vehicle is now the second largest bitcoin themed ETF (behind BITO) in the US market with just a few days of trading.”

According to Lars Seier Christense, chairman of the Concordium Foundation and founder of Saxo Bank, “such reversed price-action investment products are well known in the traditional finance sector, and are typically used for hedging.

“Typically, they cater for investors in markets where shorting is difficult, or where they would not have a relationship with their brokers allowing them to short or where margins of such short positions are very high,” he added.
“I believe such a vehicle could become quite popular for hedging and shorting purposes, being easier to invest in than outright shorts.”

However, Lian also highlighted that the key challenge when trading short ETFs is timing the market. He told Capital.com:

“At this moment in time, I think this ETF started off slower than expected as bitcoin started climbing back to over $21,000. If they were to be launched in November when Bitcoin hit its all-time high at $69,000, then perhaps you will see more influx of investors jumping in [now, as the token has been going down].”

Dan Hoover, Director at Castle Funds,  explained that the futures market in which BITI trades uses CME-listed futures, which close for an hour a day Monday through Thursday, and on Friday until Sunday (Chicago time). BTC can be bought and sold 24/7.

“This delay can create some unexpected price action in the futures as the prices ‘catch up’ to market news in Asia, especially over the US weekend. Additionally, BITI only trades on US trading days, which is even narrower than CME futures trading (9:30AM – 4PM NY time, M-F, observing most major holidays),” Hoover added.

Other competitors are spot or physically-backed bitcoin ETF projects. But, they have been pending SEC approval for a few years now.

“These ETF’s could be used to replicate the BITI strategy much more efficiently, as they avoid the compounding risks of the inverse ETF and the carrying costs of the underlying futures,” Hoover noted.

Short BTC ETF forecast

Within a day after its launch, BITI had risen to $41.3 on 22 June, up 3.6% from closing at $39.84 the day before. The fund has pulled back since and is currently (29 June) trading at $39.81.

Source: TradingView

Analysts appear to have mixed feelings on how the short bitcoin ETF will perform, as it was launched at such an uncertain time for cryptocurrencies and BTC.

In a note published on 21 June, Laith Khalaf, head of investment analysis at AJ Bell, noted that “bitcoin isn’t behaving particularly unusually and losses of this magnitude are to be expected, especially after periods of equally extreme price appreciation.”

According to Khalaf, this is not the coin’s worst performance and BTC has suffered worse “crypto winters before and come back to have its day in the sun”.

“The popularity of short BTC ETF’s, such as this latest iteration from ProShares, highlights quite how bearish a run the cryptocurrency market has been on. Short ETFs are suddenly popping up more often, as Bitcoin struggles to find a bid,” Invezz’s data analyst Dan Ashmore told Capital.com.

Long-term, Ashmore is bullish on bitcoin, however, in the short and medium-term, the ETF could perform well as the US Federal Reserve is still struggling to tackle rising inflation and a tight geopolitical situation, according to the analyst.

Saxo Bank’s Christensen agreed with Ashmore, noting that the ETF could be interesting for short-term trading.

“Unless the BTC community is completely wrong about higher levels for BTC longer-term, it would clearly not have a great investment in its own right, but more suited for short-term speculation and hedging of crypto portfolios,” he added.

Note that analysts’ predictions can be wrong. Forecasts shouldn’t be used as substitutes for your own research. Always conduct your own diligence, and remember that your decision to trade or invest should depend on your risk tolerance, expertise in the market, portfolio size and goals.

Keep in mind that past performance doesn’t guarantee future returns. And never invest or trade money you cannot afford to lose.

 

Original Source: https://capital.com/short-bitcoin-etf-explained

 

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

j j j

Tax on virtual digital assets a concern for NFTs; impact may be short term: Experts

Tax on virtual digital assets a concern for NFTs; impact may be short term: Experts

A slowdown in cryptocurrency trading may have an impact on NFT transactions as well, although it could be a temporary phenomenon as investors await more clarity from the government.

The 30 percent tax on income from the transfer of virtual digital assets (VDAs) that came into effect from April 1 is a cause of concern not only for cryptocurrencies, which have seen a drop in trading volumes, but also for non-fungible tokens (NFTs) that gathered steam in India in the past year with the entry of sports and Bollywood celebrities.

“The immediate scenario is bleak for crypto and even bleaker for NFTs in India,” Raj Kapoor, strategic advisor at Acryptoverse, a crypto-marketing firm, told Moneycontrol. “NFTs in India will face a fallout with only unique models surviving. NFT creators here are popping up daily while collectors remain non-existent.”

Anndy Lian, Chairman, BigONE Exchange, a crypto trading platform, said the tax on VDAs in India will impact NFT sales.

“The overall market condition is not favourable. NFT sales will drop further and only the better assets will have a place in the crypto-verse,” he said.

He added that NFTs that are more speculative in nature and driven by profit will suffer hard when it comes to tax.

Vinu Peter Immanuel, a partner at Link Legal who tracks NFTs, said that with average trading volumes on top cryptocurrency exchanges dropping 80 to 90 percent from a few months ago, the impact will also be seen on NFTs.

“Since NFTs are traded mostly by using cryptocurrencies, any slowdown in cryptocurrency trading may have an impact on NFT transactions as well. Although it could be a temporary phenomenon where cryptocurrency investors have taken a step back and are waiting for more clarity from the government,” he said.

Short-term impact

However, Hitesh Malviya, founder of IBC (It’s Blockchain) DAO (decentralised autonomous organisation) said NFTs in India are not even a $10 million market in terms of daily sales.

“We have got limited traction here if we compare it to the west. In the US, marketplaces are doing over a billion dollar sales volume every month. Since it’s a limited market, I don’t see many people have got affected as we have less than 1 lakh Indians who have bought any NFTs,” Immanuel said.

Siddharth Jaiswal, founder of Sportzchain, said the new taxation policy will have a short-term impact on NFTs.

“For all of us, this is the first year for the cryptocurrency and NFT tax framework. For many, 30 percent may seem a lot, but if you see the kind of exponential returns, 30 percent may seem less. There have been exponential gains as well, to the tune of 300 to 500 percent, so 30 percent (tax) seems less. However, the same is subjective,” he said.

Malviya noted that while it’s a tough law for short-term traders as they will be required to pay 1 percent on each NFT trade, it would be fine for a long-term value investor like him.

“I don’t mind paying 30 percent tax on my crypto or NFT assets,” he said.

The government said a 1 percent tax would be deducted at source on the transfer of VDAs starting July 1.

“The TDS (tax deducted at source) on its own is causing major havoc for crypto exchanges because the high-volume daily traders have disappeared and these are the guys that provide liquidity to the exchanges. But this impact has so far just appeared on cryptocurrencies,” said Pratik Gauri, founder of 5ire. “Still, I think it’ll become more widespread and show up on all VDAs, precisely because the tax has some mandates, like not being able to write off losses from one deal into another that will have a significant impact on the trading on VDAs, be it cryptos, NFTs, or other VDAs.”

Positive outlook

While Lian and Jaiswal said the tax will have an effect on NFTs, they also believe the outlook for digital collectibles is positive.

“Utility-based NFTs should expect an increase. This increase would be in favour for the India market as they will help the industry to hit a new level of adoption,” said Lian.

He expects India to triple its NFT sales in the next year.

Sportzchain’s Jaiswal noted that NFT marketplaces are coming up with new strategies to smoothen the entire buying process, with less reliance on cryptocurrencies as the medium for buying these NFTs.

“For example, NFT marketplaces in India have introduced UPI as one of the payment modes to buy these NFTs. So a drop in the trading volumes will not adversely impact the market for NFTs,” he said.

Unified Payments Interface (UPI) is a real-time payment system that facilitates instant transfer of funds between bank accounts.

Acryptoverse’s Kapoor said NFT stakeholders should really look at India’s gaming sector for a strong product market fit with NFTs as this sector has exploded in the past year, recording 170 percent growth. Jaiswal also anticipates NFTs on game merchandise to see an upswing.

“Additionally, with metaverse applications also gaining momentum, the uptake of NFTs will only increase in the future,” he said.

However, Malviya said that in India, fan collectible NFTs are emerging with entertainment companies and actors launching digital assets to promote their movies or brands.

“While NFTs will be used as an emerging tool of branding by many lifestyle and entertainment firms, such NFTs will not value over time. These are hype-driven assets that might never get any value in the secondary markets,” he said.

 

Original Source: https://www.moneycontrol.com/news/trends/tax-on-virtual-digital-assets-a-concern-for-nfts-impact-may-be-short-term-experts-8378261.html

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

j j j

Anndy Lian Spoke at Global Roundtable Review: Short Selling: What is it? Why is it Risky and How this will affect Crypto?

Anndy Lian Spoke at Global Roundtable Review: Short Selling: What is it? Why is it Risky and How this will affect Crypto?

Anndy Lian, Advisory Board Member to Hyundai DAC participated in event “Global Roundtable Review” organised by Block Review. Anndy Lian talked about the recent short selling incident for Gamestop and investors worked through social media to gain an advantage.

The following is a summary of Anndy’s speech:

An overview of the Gamestop saga: What is a short squeeze?

The last week of events is unprecedented in my opinion.
When you buy a stock, you own it and the price goes up due to the company’s performance and all. But when you short it, you are basically betting on the stock to do badly. Some hedge funds are shorting a couple of stocks. They shorted more than a 100%.

The reddit group used publicly available information, went in to buy the stocks and driving the price up, they created a short squeeze. The group drove up the price of the stock, leading to the hedge fund paying more than what they had sold it for before returning the borrowed shares, at the cost of professional traders.

That led to stopping Robinhood app that is targeted at mass retail investors to buy the stock. Forcing a crash and despite all these, the stock went back up. The people are winning.

If Gamestop new shareholders were to hold them long enough, the hedge funds will go out of business. Melvin Capital lost 53% of their investment.
Elon Musk and many other celebrities are also tweeting asking all to buy and hold. This movement has become organic.

 

What should investors know before shorting stocks?

Investors need to know what kind of risk they are getting themselves in. If you’ve ever lost money on a stock, you’ve probably wondered if there’s a way to make money when stocks fall. There is, and it’s called short selling. Even though it seems to be the perfect strategy for capitalizing on declining stock prices, it comes with even more risk than buying stocks the traditional way. Investing in stocks in the usual way is risky enough. Short selling should be left to very experienced investors, with large portfolios that can easily absorb sudden and unexpected losses.

 

How risky is it to be following leads on forums (like reddit)

If you are in investment groups or on social media, there are many groups soliciting to jab individual stocks. This is not something new. Social influencers are also doing this, in the stocks and crypto market. I would say it is very dangerous to follow blindly to the “financial advice” on social media as many times the expected outcomes are not what you want. This time this Reddit group managed to make it, but what about the hundreds or even thousands of times where retailor investors got hurt.

 

In the Gamestop saga, was there institutional money (the other camp) pushing the squeeze? Will blockchain technology help?

I hope not, else we will be losing faith in this so call free, open market in USA. I would believe not all hedge funds are bad. There are a small handful of bad actors right now. Nasdaq CEO is calling regulators to come in and account for what has been done.

Regulators should get to the bottom of this, how is it possible for them to short more than 100% of the stocks. The system must be upgraded. In order to have a fair market, this is also a perfect time to look at blockchain technology, this the same technology that is backing up Bitcoin and many others. Blockchain technology will improve transparency and efficient too.

The reddit group – called SatoshiStreetBets – has driven up price of Doge, similar to how WallStreetBets did for GameStop. DOGE started rallying after a Twitter user calling himself the chairman of WallStreetBets (though who is not affiliated with the subreddit) asked followers about the cryptocurrency.

“What you are seeing on DOGE is not a short squeeze. It is the effects of social media gathering and working together. You cannot short sell or squeeze DOGE. It’s only rising because of speculation.”

This DOGE movement is used to demonstrate how users can manipulate prices if they move together. An individual cannot drive the prices but a group or a community of people who worked on the same goal can do that.

 

Can a similar short squeeze situation happen in Singapore?

Short-selling is not banned in Singapore, but SGX already requires investors to mark sell orders as “long” or “short” and publishes both daily and weekly reports on short-selling activity. “Abusive” short-selling – for example, with the spread of false rumours – could also be prosecuted as market manipulation or deception under the Securities and Futures Act.
Such policies will improve transparency on short-selling activities in the securities market and enable investors to make more informed trading decisions. With the added on help with technology such as blockchain, it reduces the chance of us being in this situation.

But then again, “Anything can happen.” Maybe less likely in Singapore.

 

Video:

https://youtu.be/KeoTRTKrwVA

 

About Anndy Lian:

www.anndy.com/about

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

j j j