Inverse Bitcoin ETF is a financial product that provides the opposite return rate of Bitcoin, the underlying asset. As the price of Bitcoin falls, the value of the ETF rises.
How does a reverse spot Bitcoin ETF work?
Inverse Bitcoin ETF uses derivatives to move in the opposite direction of the Bitcoin price. When the price of Bitcoin falls, the value of the ETF increases, and when the price of Bitcoin rises, the value of the ETF falls. This allows investors to profit from falling Bitcoin prices without having to short the asset directly.
Inverse ETFs are generally designed for short-term trading and may not perfectly track Bitcoin’s inverse performance over the long term due to factors such as fees and tracking errors.
Inverse vs. Regular Spot Bitcoin ETF
Inverse Bitcoin ETFs aim to provide returns that are inverse to Bitcoin. A regular spot Bitcoin ETF tracks Bitcoin’s performance and seeks to reflect the overall movement of the token’s price.
Additionally, inverse ETFs often use financial derivatives to achieve their objectives, which can introduce additional risk and complexity compared to traditional spot Bitcoin ETFs.
Short vs. inverse
Although both types of ETFs offer a way to profit from falling Bitcoin prices, short Bitcoin funds and inverse Bitcoin funds use different mechanisms to achieve this goal.
Short Spot Bitcoin ETF aims to profit from a decline in the price of Bitcoin by directly selling Bitcoin or derivative contracts representing Bitcoin.
In contrast, inverse Bitcoin ETFs attempt to achieve daily inverse returns in the price of Bitcoin using financial derivatives or other strategies, allowing investors to profit from declines in the price of Bitcoin without having to sell directly. Let it happen.
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ETF (BITI, a Canadian exchange-traded instrument, provides 1x inverse daily Bitcoin price performance using the Horizons Bitcoin Front Month Rolling Futures Index.
Investment firm ProShares filed for an inverse Bitcoin ETF on January 16, 2024, almost a week after the U.S. Securities and Exchange Commission approved a spot Bitcoin ETF.
In the prospectus material for its reverse Bitcoin ETF, ProShares UltraShort Bitcoin ETF, ProShares notes that it will provide reverse Bitcoin performance using derivatives such as swap contracts, futures contracts, forward contracts and options on futures contracts, securities and indices. I did.
“The Fund obtains short-term exposure to Bitcoin in a manner designed to provide inverse leveraged exposure to the daily returns of the index. The Fund does not sell Bitcoin directly. Investors wishing to sell Bitcoin directly may do so through sources other than the Fund. You should consider investing.” ProShares wrote:
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