Declining Trading Volume for BITO
In January 2024, the ProShares Bitcoin Strategy ETF (BITO) registered significant decline in trading volume with shares worth slightly over $500 million changing hands on the NYSE on Jan. 18. This represented a 75% drop from the record $2 billion in trading volume experienced on Jan. 11. Data from ETF.com also indicated a net outflow of over $270 million for BITO during the same period.
Spot Bitcoin ETF Trading Surges
Spot Bitcoin ETFs that debuted on Jan. 11 recorded a cumulative trading volume of $14 billion in the first week after launch, surpassing the trading volume of all other ETFs launched in 2023. These funds amassed a total of over $1.2 billion in investor money within the same period.
Impact of Spot Bitcoin ETFs
The approval of spot Bitcoin ETFs in the U.S. has significant implications for mainstream investors, providing exposure to Bitcoin for institutional investors without the hassle of storing the cryptocurrency securely. These new ETFs also offer a better option compared to futures-based ETFs like BITO, which invest in CME BTC futures, incurring “roll costs” that negatively impact long-term performance.
Futures-based ETFs as a Hedge
Despite the decline in trading volume for BITO, industry observers believe ProShares’ Bitcoin Strategy ETF still has a crucial role as a hedging instrument, especially for authorized participants who may not have accounts with CME futures to hedge their positions.
Hot Take
The introduction of spot Bitcoin ETFs has significantly changed the dynamics of cryptocurrency trading and investment, providing a new market access to institutional, as well as retail, investors. While BITO saw a decline in trading volume, its role as a hedge is still essential. However, the new spot Bitcoin ETFs present a more attractive alternative due to their robust performance and ability to offer exposure to the leading cryptocurrency without the complexities of futures-based ETFs.
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