ProShares, an issuer of listed financial products (ETFs), announced the launch of its new product, BITI, on the Toronto Stock Exchange on June 21. It will allow bitcoin to be sold short. The release of this digital asset comes against a difficult backdrop for the cryptocurrency industry as the value of all digital devices continues to plummet. Using BITI, investors can bet on bitcoin’s decline in order to replenish their coffers.
A listed financial product linked to Bitcoin
ProShares is not its first financial product concerning bitcoin. Last October, the Securities and Exchange Commission (SEC), the US authority responsible for regulating and supervising the financial markets, authorized the issuance of BITO, an ETF that bets on the growth of Bitcoin in the short term.
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Listed financial products are investment funds that can be traded on the stock exchange. They replicate the evolution of a stock market index. A CAC 40 ETF reproduces the CAC 40 stock market index: if it rises, the financial product increases and vice versa if the index falls. They also facilitate acquisitions in a sector. As Coinhouse, a cryptocurrency exchange, explains, “ Instead of buying shares one by one to build a balanced portfolio in this sector, the investor has only one security to acquire with the ETF. It is therefore much more practical and costs less. [de transactions] “.
An ETF that mimics the price of Bitcoin has many advantages. It is a tradable asset on the stock exchange and therefore, be framed. Something to reassure financial institutions. The latter do not dare to invest in cryptocurrencies because of the many risks that accompany the acquisition and possession of these digital devices. It is out of the question for them to go through intermediary platforms and expose themselves to piracy.
On the other hand, ETFs are issued directly by institutions known to the world of traditional finance. In the case of BITI and BITO, it was the SEC that took care of occupying the two cryptoassets. It thus ensures that investors are protected from any manipulation or malicious actions.
For ProShares, the arrival of the BITI allows ” avoid the significant costs and fees typically associated with shorting bitcoin “. The company states that ” investors will eventually be able to take advantage of a bitcoin price decline and hedge their cryptocurrency exposure with the convenience of an ETF “.
Betting in a volatile market
After the collapse of the stablecoin TerraUSD and the freezing of activities of Celsius, the cryptocurrency market is facing a major setback. Bitcoin has lost 56% of its value this year, falling below $21,000 while that of ether has fallen 69% to $1,160. Crypto-asset market capital is now just $857 billion, well behind the $3 billion recorded in November.
In this context, investors are wondering if it is really possible to make money by buying an ETF modeled on the price of bitcoin. Michael L. Sapir, Chairman and CEO of ProShares, seeks reassurance and states that “ BITI offers investors who believe the price of bitcoin will fall an opportunity to make a potential profit or hedge their cryptocurrency holdings. BITI allows investors to conveniently gain short exposure to bitcoin by purchasing an ETF in a traditional brokerage account “.
If ETFs are rather common in the world of the stock market, a listed financial product that bets on the fall in the price of Bitcoin is something new. Evolving in a volatile and uncertain market, it is currently difficult to know if the BITI represents a promising investment.