The frenzy surrounding the launch of spot Bitcoin exchange-traded funds has yet to lose steam as Wall Street’s latest entrant offers supercharged versions of such products.
ProShares on Tuesday launched ProShares Ultra Bitcoin ETF (ticker BITU), which tracks two times the daily performance of Bitcoin via the Bloomberg Bitcoin Index, and ProShares UltraShort Bitcoin ETF (SBIT), which tracks the inverse of that, according to a release. Each has an expense ratio of 95 basis points.
The twin launch comes after the successful debut of nearly a dozen Bitcoin ETFs directly investing in the token itself in January has hauled in $12 billion of net inflows and nearly $60 billion in assets. What makes the two new ProShares’ ETFs stand out is that they offer magnified returns on spot Bitcoin and not the futures market.
The stellar inflows highlight the seemingly insatiable appetite for spot Bitcoin ETFs and underscores the growing popularity of ETFs as vehicle for frictionless trading. More are coming such as the newly converted Hashdex Bitcoin ETF (DEFI) and, if approved, Grayscale Bitcoin Mini Trust.
“It demonstrates how ETF managers can be an opportunistic bunch by trying to leverage off the positive sentiment as much as possible,” said Michael O’Riordan, founding partner of Blackwater, an ETF consulting firm.
New products are flooding the market after regulators green-lit the launch of spot Bitcoin ETFs, kicking the door open for investors to sink capital. Such funds spotlight the growing demand for crypto exposure for investors of all stripes who seek to channel fresh investment on whichever direction they think Bitcoin will go next.
To Matt Maley, chief market strategist at Miller Tabak + Co, while the launch of leveraged ETFs was just a “matter of time,” they could be a double-edged sword.
“On the negative side, it will likely lead to an increase in speculation in an asset class that is already volatile. However, they will also help investors hedge their positions. So, that could offset some of that speculation,” he said. “Overall, it should continue to draw more investors into this asset class.”
Bitcoin’s volatile price movements explain the growing demand for investment vehicles that offer leveraged and short exposure to Bitcoin. While the coin has shed about 10% since hitting a peak in mid-March, it’s still up 54% since the start of the year. This year marks a comeback from the dark days of 2022 when multiple prominent firms spectacularly collapsed, pushing the coin lower by 64% to its second-worst annual performance on record.
Take the $1.5 billion VolatilityShares’ 2x Bitcoin Strategy ETF (BITX). The fund, which offered double the performance of the S&P CME Bitcoin Futures Daily Roll index each day, has attracted inflows every month since its launch in June, raking in $885 million last month alone.
For Michael Sapir, ProShares chief executive officer, his leveraged BITU fund offers investors the opportunity to pursue “magnified Bitcoin returns or target a level of exposure with less money at risk.” On the flip side, the UltraShort fund, SBIT, “allows investors to seek to profit when the price of Bitcoin drops or hedge their Bitcoin exposure,” he said.
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