Investors Flock To Short Bitcoin ETF, Fund Doubles Holdings

Crypto bears seem to be betting on new lows.

The ProShares Short Bitcoin
BTC
Strategy ETF (BITI), the first inverse exchange-traded fund in the U.S. designed to give investors a way to profit from declines in the price of the cryptocurrency, saw a daily net inflow of 1684 BTC yesterday, essentially doubling the vehicle’s holdings to 3086.2 BTC (approximately $59 million), according to Norway-based crypto analytics firm Arcane Research.

Launched just nine days ago, it is already the second-largest bitcoin-focused ETF listed in the U.S. The fund delivers the opposite of the performance of the S&P CME Bitcoin Futures Index and is structured in such a way that if bitcoin’s price falls 1%, investors book a 1% profit, before ​​expenses and management fees.

“What you see is a very fair demand for traders using traditional exchange infrastructure and brokers to short bitcoin, which makes sense from a rational point of view given bitcoin’s correlation to U.S. equities, inflation readings and all the unresolved contagion specific to crypto,” says Arcane analyst Vetle Lunde.

The inflows occurred on the same day the U.S. The Securities and Exchange Commission rejected Grayscale Investments’ application to convert its $12.9 billion Grayscale Bitcoin Trust (GBTC) into a spot bitcoin ETF; the SEC’s decision came post-market close.

Notably, the ProShares Bitcoin Strategy ETF (BITO), which conversely offers exposure to bitcoin returns and is far bigger than its competitors with $647 million in assets under management, saw its largest daily net outflow since May 20 and 5th largest this year.

According to Lunde, this means that “short-demand is seriously outpacing long-demand in U.S. ETFs” and “there’s a clear desire to either hedge or just blatantly short bitcoin at current prices.”

As of 10:07 am E.T., the cryptocurrency is trading around $18,870, down by 6.21% over the past 24 hours.