The Next Chapter: Proshares Bitcoin Strategy ETF
by Chad Steinglass
Proshares Bitcoin Strategy ETF
Today is the first day of trading for the new Proshares Bitcoin strategy ETF, the first Bitcoin linked ETF to trade on a listed US exchange. Because this ETF will hold CME listed Bitcoin futures and not actual Bitcoin, it has come under fire from many investors and traders who point that it has so much built in cost and inefficiency that it is simply not a good product for investors. This criticism has ramped up in the last several days, after weeks of optimism and general celebration from the crypto community that it is finally getting an ETF.
So, who is right?
Will the approval of the first official Bitcoin ETF be viewed as a bullish event? Or will this ETF be viewed as an inferior product that more traders will want to try to short rather than to buy?
In my personal opinion, I think the answer is that both of these scenarios are true.
Wall Street & Professional Traders
It appears to me that Wall Street and professional traders are looking at the bear case. They understand the mechanics of how this ETF will work and what its performance relative to the Bitcoin spot price will be, and they see a product that may significantly underperform Bitcoin. Their next thought is a logical one: if there is a new product that is like Bitcoin, just worse, then that can create opportunity. Theoretically, market makers and hedge funds could take a short position in the ETF and a long position in actual Bitcoin to create a position that may benefit the ETF’s inefficiency. Investors see the blazing runup of process so far in October as frothy excitement over an ETF that it could make more sense to sell than to buy, and they may be leaning short into the ETF launch expecting that excitement to wear off once the reality of the situation sets in.
Retail & Whales
On the other side, there has been heavy buying in the spot markets from both retail and whales alike, which has driven prices significantly higher in a short period of time. I believe these traders see the ETF approval as a tacit acknowledgement from the SEC, who had to approve the listing, that Bitcoin is here to stay and that the likelihood of stifling regulation is less of a worry. They see it as a sign of a broadening base and a maturing asset. It is possible that some are buying because they think that new money will rush into the ETF and push prices higher immediately, and are looking to make a quick return, but I personally believe a majority of these buyers have a longer time horizon in their sights, and see an asset moving into a more favorable environment.
As I said, I think both sides are correct in their assessment. As Wall Street surmises, this ETF may be a disappointment from a retail investor adoption standpoint, and it’s possible that prices may temporarily dip as that becomes apparent. But the bulls are also correct. It may not really matter whether or not this particular ETF is a commercial success. The door is now open, and better products may follow, creating an accessible onramp for millions of traditional asset investors to start making some allocations to Bitcoin. In my opinion, that is quite the bullish development in the long run.
CrossTower Inc. provides this content for general information purposes, to better inform you on your digital asset investment journey. We do not provide investment recommendations or provide tax advice. Please consult your investment professional or tax advisor if you require assistance in these areas.
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