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”.

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BLOCKCHAIN EXPERT SHARES HIS OPTIMISM AMID ONGOING ‘CRYPTO WINTER’

BLOCKCHAIN EXPERT SHARES HIS OPTIMISM AMID ONGOING ‘CRYPTO WINTER’

Anndy Lian is a blockchain executive and author who gave his insights this week regarding the current ‘crypto winter’ marked by the downturn in the virtual asset market.

This Singapore-based chairman of cryptocurrency trading platform BigONE Exchange expressed his upbeat stance despite the market drawdown investors worldwide feel across the board.

We want to share this report with our readers about Mr. Anndy Lian’s hopeful viewpoints despite the present ‘crypto winter.’ We believe we can mitigate their worries, especially if they are adversely affected investors.

Crypto winter is a period when virtual currencies’ trading prices sharply drop, and investors do not see any recovery in sight for more than one year. This time spurs paranoia that the notoriously volatile cryptocurrency industry is about to undergo another prolonged slump.

Additionally, crypto winter indicates a steep decline in virtual coin prices followed by a prolonged flat trading period. The most recent crypto winter took place around 2018.

During that period, Bitcoin rallied to approximately US$20,000 prior to an estimated two-year slide that witnessed it plummet to under US$5,000.

Lian, who wrote the best-selling reference, “Blockchain Revolution 2030,” published by South Korea’s largest bookstore chain, Kyobo, remarked that the Terra crash had doubled down on investors’ fear that the sharp meltdown in the virtual currency market could be longer-lasting and not transitory, much like the US inflation’s steep surge.

This virtual asset collapse drew in confident crypto-asset newcomers, making it quite astonishing. Lian added that the new investors felt enticed partly due to the high level of well-known venture capitalists pouring their investment funds into the cryptocurrency startup and its stablecoin offering.

The Mongolian Productivity Organization’s chief digital advisor mentioned that cryptocurrency commentators were already noting the first signals of crypto winter. These signs are led by Bitcoin’s fall from grace this year.

The flagship cryptocurrency, which trades at exactly US$29,273.97 at the time of writing per the information posted on Coinmarketcap.com, is down from its spectacular US$69,000-high in November 2021 to US$33,000 in January this year.

In Lian’s article posted on blockchain and cryptocurrency news source Forkast News, he remarked that the final nails in the coffin consist of the recession risk following the tapering off of trillions of US dollars injected into the United States’ economy and the US Federal Reserve System getting serious about raising interest rates.

He added the record-busting inflation rates in the world’s largest economy complement the implosion of UST and Terra’s LUNA in dragging down the already ailing crypto-asset market.

Nonetheless, Lian cited that he believes the cryptocurrency and blockchain space would likely become stronger from the present market downturn. He also said that these industries would eventually be more innovative and integrated with mainstream retail and financial ecosystems.

Lian mentioned investing’s fundamental tenets as well. He cited that retail investors should only invest what they can afford to lose, get involved in the cryptocurrency investment scene with a lucid plan, and be careful with crypto-assets’ inherent volatility.

He also said that investors should not invest too much as a component of their overall investment portfolios. We appreciate Mr. Lian’s views about the crypto winter.

We understand that many virtual currency investors feel perturbed these days. However, we hope they will take Mr. Lian’s perspectives and advice.

We are on the same page as this blockchain professional. We also believe the current crypto winter will not last, and better things are ahead for cryptocurrency investors.

 

Original Source: https://cryptofrontline.com/blockchain-expert-shares-his-optimism-amid-ongoing-crypto-winter/

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”.

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Are we heading for a post-Terra crypto winter?

Are we heading for a post-Terra crypto winter?

Terra’s LUNA and UST implosion is dragging down an already ailing market. What do other developments suggest about crypto’s long-term future?

The Terra crash has doubled down on people’s fears that the sharp downturn in the crypto market, much like the steep rise in U.S. inflation, isn’t transitory but could be longer-lasting.

Led by Bitcoin’s fall from grace, down from its spectacular US$69,000 high in November 2021 down to US$33,000 in January this year, crypto commentators were already noting the first signs of a “crypto winter.” But the final nails in the coffin now include record-busting inflation rates in the U.S., a Federal Reserve getting serious by raising interest rates, and the risk of recession after the tapering off the trillions of dollars injected into the economy.

And it’s not just Bitcoin with its seventh red candle week in a row. Ethereum is also currently down around 58% from its all-time high, and altcoins are down around 80% in value. It’s not a pretty picture, made even worse by the US$40 billion flash crash of LUNA and TerraUSD, which had, “a domino effect on the rest of the cryptocurrency market, tanking the price of Bitcoin and accelerating the loss of $300 billion in value across the crypto economy.” To cap it off, total value locked (TVL) in decentralized finance (DeFi) dropped last week to US$56 billion, according to industry monitor DeFi Pulse, and even NFTs dropped 65% after the Terra fiasco. Overall crypto markets lost a total of US$1 trillion in April.

But if this is the start of another market cycle, dramatized by Terra, there is plenty that marks it as different from previous downturns, not least that the regulatory attention on the crypto industry that was already in motion will be accelerated. “Standing between broad-based mainstream adoption of crypto infrastructure for commerce and financial applications at a global scale is this regulatory clarity,” Circle CEO Jeremy Allaire told Yahoo Money. “We have the impetus to see that happen now.”

Just as importantly, countries around the world aren’t suddenly going to row back on their engagement with the crypto and blockchain space. Indeed, news that South Korean regulators are investigating Terra may in the longer run help to strengthen plans for crypto-friendly legislation promised by the incoming new president.

Another sign that long-term crypto adoption is moving forward is confirmed by the British government, which says it is planning to regulate crypto, including allowing stablecoins to be a form of payment, as part of its bid to turn the nation into a global crypto hub. It’s therefore excellent timing for Coinbase to launch a global crypto think tank to help mold policy debate about the industry.

Another key player, venture capital firm Andreessen Horowitz (a16z), in its first State of Crypto Report stated that we are now in the middle of the fourth “price innovation” cycle. Which in plain English means that despite the current market downturn, the hard work in the background with development will lead to innovation and growth in the longer term and the start of a new cycle. “Whereas prices are often a lagging indicator of performance in some industries, in crypto they are a leading indicator,” wrote the authors of the a16z report. “Prices are a hook. The numbers drive interest, which drives ideas and activity, which in turn drives innovation.”

While the euphoric tone of the Bitcoin 2022 conference in Miami in early April may seem a distant memory right now, the news from Jack Mallers, CEO of Strike, advancing their Lightning Network-based solution is significant. The integration of the Strike wallet with major online players in the U.S. economy aligns with Satoshi’s vision of Bitcoin as a payment system rather than a store of value. It’s also worth noting the Lighting Network-related news from ex-Diem head David Marcus, in the midst of the Terra events on May 12, to launch a new company, Lightspark: “Downturns are good moments to focus on building and creating value with mission-aligned people.” Despite FTX CEO Sam Bankman-Fried’s criticism of Bitcoin for payments, this has scope to offer an exciting integration with fiat money that could be the major development to come out of the current downturn.

In the meantime, while we can only guess at the depth of the crypto downturn, it’s clear that the same basic tenets of investing remain — that retail investors in particular should only get involved with a clear plan in mind. They should only invest what they can afford to lose and be careful with the inherent volatility of crypto assets, and not invest too much as part of their overall portfolio. Part of what made the Terra crash so shocking was that it drew in crypto newcomers who were confident, in part thanks to the high level of prominent venture capitalists investing in the startup and its stablecoin product. But sometimes, as we learned with the 2008 financial market crash, what appears to be the safest assets on the surface can prove to be the riskiest.

However, it’s the long-term investments in the crypto industry that will make the real difference. With recent news that banking pillars like Goldman Sachs are investing in the space, to Meta’s plans to process digital asset payments and investments, a clear difference between the last downturn and this one is the level of institutional and governmental adoption.

 

 

Original Source: https://finance.yahoo.com/news/heading-post-terra-crypto-winter-030200028.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”.

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