ProShares newest exchange traded fund (ETF) that enables investors to short Bitcoin (BTC-USD) has risen 63% since it launched yesterday as a growing number of investors bet on a continued crash in the cryptocurrency market.
The ProShares Short Bitcoin Strategy ETF (NYSEARCA:BITI) that trades under the ticker symbol “BITI” has gotten off to a robust start as investors clamor to short Bitcoin as its price slumps amid a downturn in the entire cryptocurrency sector. Over the weekend, the price of BTC-USD fell below $20,000 for the first time in nearly two years, dropping as low as $17,600 before recovering to trade at about $20,500 today.
What Happened
Yesterday, ProShares launched the first short Bitcoin ETF in the U.S. It arrives eight months after the investment management firm created the first U.S. Bitcoin futures exchange traded fund. The short Bitcoin ETF gives investors a way to profit from declines in the price of the world’s largest cryptocurrency, which has experienced extreme volatility in recent weeks.
Bitcoin fell to a new 2022 low over the weekend of $17,601.58, according to Coin Metrics. While the price of Bitcoin has since recovered, it is struggling to remain above $20,000 and is 70% below its all-time high of $68,000 reached last November. Other cryptocurrencies, from Ethereum (ETH-USD) to Dogecoin (DOGE-USD) have also experienced sharp declines this year, dropping more than 75% from peaks reached last autumn.
While BITI is the first ETF of its kind in the U.S., in neighboring Canada, similar ETFs that enable investors to short Bitcoin already exist. However, they trade on the Toronto Stock Exchange (TSX) and are not easily accessible to most U.S. investors.
Why It Matters
The strong start to ProShares’ Short Bitcoin Strategy ETF shows that investors are pessimistic about Bitcoin and the overall cryptocurrency market. People who are buying BITI shares are betting that the price of Bitcoin, which is seen as a bellwether for the entire crypto industry, will continue to fall lower. Sentiment towards Bitcoin and cryptocurrencies in general is souring as interest rates rise and fears grow that the global economy will fall into a recession this year and leading into 2023.
Even some of the biggest cryptocurrency bulls are acknowledging that demand for digital coins and tokens has fallen precipitously in recent months, and that a “crypto winter” has gripped the sector. Several prominent cryptocurrency companies, including trading platforms Coinbase (NASDAQ:COIN) and Gemini, have announced staff layoffs in recent weeks amid the downturn in the sector. Analysts that had predicted BTC would reach $100,000 this year are now revising lower their forecasts.
What’s Next for the New BITI ETF
The price of BTC-USD is holding above $20,000 for now. However, Bitcoin could easily slip below that key threshold and fall further. Ian Harnett, co-founder of Absolute Strategy Research, said earlier today that Bitcoin could fall to $13,000 or lower, which would be an almost 40% drop from current levels. These types of negative forecasts are the reason why investors are piling into the ProShares Short Bitcoin Strategy ETF.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
