Betting against Bitcoin? ProShares files for Short Bitcoin Strategy ETF with the U.S. SEC

  • The ProShares Short Bitcoin Strategy ETF will be the first U.S. ETF to bet against the performance of Bitcoin futures.
  • BTC can face greater volatility this year as the Fed turns hawkish and prepares for aggressive rate hikes.

Betting against Bitcoin could become easier than ever before! On Tuesday, April 5th, ProShares filed for a Short Bitcoin Strategy exchange-traded fund (ETF) to track the inverse performance of an index of Bitcoin futures.

Last October 2021, ProShares introduced the Bitcoin Strategy ETF under the ticker BITO. It registered a solid response becoming the most-popular ETF debut on record.

If approved by the U.S. SEC, the ProShares Short Bitcoin Strategy ETF will be the first U.S. ETF to bet against the performance of the BTC futures. However, last year, the SEC had rejected a similar application by ProShares rival Direxion. But as per Bloomberg Intelligence, the SEC could be rather comfortable this time approving the product. Eric Balchunas, the ETF analyst at BI, said:

ProShares nailed the SEC’s openness for a futures ETF and so there’s no reason to doubt them here, especially because BITO trading has been fine, it clearly works. This could mean the SEC is ready to take the next baby step.

The ProShares filing is a preliminary prospectus subject to completion. The application also suggests a public offering 75 days after filing. Of course, the SEC can further delay it as it has severally previously.

Bitcoin Drops 5% Amid Concerns of Fed Rate Hike

Bitcoin (BTC), the world’s largest cryptocurrency has seen a sharp drop correcting 5 percent over the last 24-hours. Further, BTC has corrected more than 10 percent since ProShares filed for its Short Bitcoin Strategy ETF, over the last two days.

The recent correction comes as the U.S. Fed is planning its biggest rate hike in order to control the soaring inflation. As per the Bloomberg report, Bitcoin has been showing a greater correlation with the U.S. equity market over the last 90 days.

Fed could be raising interest rate by 50 basis points in the near term. This can create further pressure on the equity market as investors will prefer to be risk-averse. In this case, the crypto market could also face strong selling pressure.

Speaking to Bloomberg, crypto billionaire Mike Bloomberg said that BTC can rise once again just as the Fed takes a pause. But the Fed has already hinted at 4-6 interest rate hikes this year. This means we could be expecting greater volatility ahead of this year in 2022.

On the other hand, crypto asset management firm Grayscale is pushing for the approval of its spot BTC ETF. Grayscale CEO Michael Sonneshien said that the SEC’s case against a spot Bitcoin ETF has weakened. “If the SEC is comfortable with a Bitcoin futures ETF, they must also be comfortable with a spot Bitcoin ETF. And they can no longer justifiably cite the ‘40 Act as being the differentiating factor,” he said. 

During a recent interview with Bloomberg, the Grayscale CEO said that his company could take the SEC to the court.

Read More: Grayscale threatens to sue the SEC if its Bitcoin spot ETF is rejected

About Author

Bhushan is a FinTech enthusiast and holds a good flair for understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In his free time, he reads thriller fictions novels and sometimes explores his culinary skills.

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