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Interest wanes in Bitcoin futures ETF’s as contracts fall below 5K

January 13, 2022 Coin Telegraph

CME

Declining interest in Bitcoin futures ETFs may have a number of reasons, chief among them the declining price of BTC since the ATH reached in mid-November.

After a stellar launch, interest has waned in the ProShares Bitcoin Strategy Exchange Traded Fund (BITO) which now has the lowest amount of CME contracts since Nov. 2021.

The Bitcoin futures exchange traded fund (ETF) holds a total of 4,904 Chicago Mercantile Exchange (CME) futures contracts, according to the fund's latest update from Jan. 11. A Bitcoin futures ETF allows investors to speculate on the future price of Bitcoin (BTC) without having to hold the asset themselves.

BITO’s assets under management (AUM) figure has retraced to $1.16 billion from a high of $1.4 billion last Nov. This is about the same amount it held two days after its Oct. 18 launch when it became the fastest fund to reach $1 billion in AUM ever.

Arcane Research discussed possible reasons for the BITO retrace in its latest Weekly Update. As you might expect, the poor price performance of BTC over the past two months is the chief explanation, as Bitcoins drifts ever further from the $69,000 it reached on Nov. 10 down to its current price around $43,700.

Arcane suggests another explanation for the declining interest in BITO is the high cost that comes with operating a futures-based ETF, with the rolling costs required each month to stay ahead of the current BTC price driving up costs:

“BITO sells its front-month exposure to buy the next-month contract each time the contract approaches expiry.”

Arcane believes that a spot-based BTC ETF would not be subject to the same high fees that grow over time. The SEC has not yet approved any such ETFs, but a ruling on the filing by Fidelity Investments is scheduled to be made by Jan. 20.

Other BTC futures ETFs have also failed to significantly increase their AUMs, which are a fraction of the assets of BITO. Valkyrie’s Bitcoin futures ETF (BTFD), which launched just days after BITO, currently holds $71.9 million.

Although the VanEck Bitcoin Strategy ETF (XBTF) has increased its AUM by $6 million since its Nov. 16 launch, it currently holds just $15.8 million according to Dividend.com.

VanEck Bitcoin Strategy ETF launch day volume a fraction of BITO’s

November 17, 2021 Coin Telegraph

$<div>VanEck Bitcoin Strategy ETF launch day volume a fraction of BITO's</div>$

Coin Telegraph

Lower volumes compared to ProShares were expected, but Van Eck hopes its lower fees can give it an edge over competitors.

The VanEck Bitcoin Strategy ETF (XBTF) closed its first day of trading on Nov. 16 with "respectable" trading volume, but one that pales in comparison to similar launches.

Bitcoin futures ETFs provide investors exposure to potential future prices of Bitcoin without forcing them to hold any Bitcoin themselves.

At market close on the Chicago Board of Exchange (CBOE), XBTF had accumulated around $9.5 million in assets under management (AUM), and saw around $4.6 million in daily trading volume according to investing.com. This is just a fraction of the first-day trading volume of $1 billion the ProShares Bitcoin Strategy (BITO) enjoyed on Oct. 19 on NYSE. BITO has since reached the top 2% of all ETFs by total trading volume.

Tommy Horan, Head of Corporate Partnerships at Australian exchange Swyftx said that it had been a “pretty subdued launch but VanEck won’t be too worried. Their [lower] fees should attract a steady rate of inflows over the next quarter.

“This was always going to be a bit of a non-event after all the hype around ProShares’ $1.1bn launch and continues the trend we saw with Valkyrie’s ETF.”

Valkyrie’s Bitcoin futures ETF also had a relatively lackluster launch with BTF dropping 3% in price in the first hour of trading on Oct. 22 on Nasdaq, despite its $78 million in trading volume.

Eric Balchunas, senior ETF analyst for Bloomberg suggested in a Nov. 17 tweet that XBTF’s trading volume would normally be pretty good, but that it has been vastly overshadowed by BITO.

$XBTF traded about $5m on Day One. Normally that would be pretty good, prob Top 10% of launches this year. It's just shadowed by the absurd $1b $BITO laid down, not to mention $78m that $BTF did. pic.twitter.com/bjqrUnThzr
— Eric Balchunas (@EricBalchunas) November 16, 2021

The lower trading volume on XBTF comes in the wake of the SEC rejecting VanEck’s application for a spot Bitcoin ETF. As opposed to the futures ETF, a spot ETF would allow investors to gain exposure to the current price of Bitcoin without needing to hold BTC themselves.

Overall, Horan lauded the XBTF launch but says crypto ETFs won't hit their stride until a spot ETF is approved: “It’s great for the industry to see crypto funds getting regulatory approval, but until a spot ETF is accepted, no-one is going to be getting over their ski tips.”

Van Eck

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