Bearish Options Traders Target Bitcoin ETF to Capitalize on Crypto’s Fall

BExchange-traded funds tied to itcoin futures are turning heads, and even the recent fall in cryptocurrency prices has drawn even more bearish options traders to bitcoin ETFs to capitalize on the short trade.

The ProShares Bitcoin ETF (BITO) fell 36.9% since the start of the year, following the fall in the cryptocurrency markets.

Nevertheless, BITO continues to attract opportunistic traders, as short interest on the $748 million ETF as a percentage of outstanding shares has reached nearly 11% of total assets, near the highest level. high since the fund’s October 2021 launch date, Bloomberg reported.

Additionally, BITO’s ratio of open interest in bearish put option contracts to long call open interest has widened since mid-April to reach all-time highs.

The increased interest in bearish BITO options indicates that cryptocurrency bears are looking to ETFs as an easy and liquid avenue to short cryptocurrency in a market without an inverse ETF or dedicated bitcoin short to capitalize. on the fallout on the crypto market.

The fund’s sponsors, including Direxion, ProShares and AXS, have filed exemption requests with the Securities and Exchange Commission for ETFs that would provide short exposure to Bitcoin futures, but none of the requests have yet gone through. regulatory review. Consequently, bearish traders turned to betting against BITO, the first and largest U.S.-listed Bitcoin-derived ETF by asset, as a proxy bearish play.

“BITO is first, it’s bigger and there’s more volume,” Bloomberg Intelligence ETF analyst Athanasios Psarofagis said. “The others were a bit of a flop.”

BITO was the first U.S. bitcoin-linked ETF that offered investors the opportunity to gain exposure to bitcoin returns in a convenient, liquid, and transparent way. The fund seeks to provide capital appreciation primarily through managed exposure to bitcoin futures. BITO does not invest in Bitcoin directly, and the price and performance of Bitcoin futures is expected to differ from the current “spot” price of Bitcoin.

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