Will Bitcoin Futures ETFs Survive?
With the approval of spot Bitcoin ETFs, the role of futures funds has become less clear to many. However, Simeon Hyman, Head of Investment Strategy at ProShares Bitcoin Strategy ETF (BITO), believes each will find its investor.
This perspective appears to challenge the prevailing notion that institutional and private investors pouring millions into spot Bitcoin ETFs will pull their investments from futures funds due to the latter's higher associated costs (e.g., additional expenses incurred when transitioning from one futures contract to another).
In autumn 2021, ProShares was the first to secure SEC (Securities and Exchange Commission of the USA) approval for a Bitcoin futures ETF valued at $1.9 billion. ProShares Bitcoin Strategy ETF (ticker: BITO) garnered $570 million on its debut trading day. Notably, before the advent of spot funds, their futures counterparts indeed showed high returns.
Two years later, in October 2023, ProShares was among the first to introduce Ethereum futures ETFs in the US. Today, ProShares offers a vast ETF lineup with assets exceeding $64 billion.
Therefore, BITO could well act as a reliable indicator of the state of futures cryptocurrency funds amidst the arrival of eleven spot Bitcoin ETFs.
Clearly, they face (and will continue to face) intense competition: behind some of the spot ETFs are the world's major TradFi companies, significantly influencing BTC's pricing environment.
On the other hand, it remains true that BITO's trading volumes have seen a remarkable increase. Bloomberg's data indicates that on January 11, 2023 (just a day after spot Bitcoin ETF trading commenced), BITO's volume hit an all-time high of nearly 89 million shares! And on February 1, when ProShares Bitcoin Strategy ETF was trading at $298 million, the spot Grayscale Bitcoin Trust recorded $291 million in trades.
Based on what we’ve seen over the past month, we feel really good. It’s reinforced our view that there are enduring benefits to a futures based approach,Hyman optimistically remarks.
However, Hyman's analysis might be subject to critique. Since the launch of spot Bitcoin ETFs, BITO has experienced a significant withdrawal of funds: the fund saw an approximate $362 million reduction over a month. It seems that the record trading volume of ProShares Bitcoin Strategy ETF, which underpins Hyman's optimism, was driven by investors offloading the fund's shares.
Nevertheless, BITO is confident that as Bitcoin becomes more widely adopted, investors will look to diversify their portfolios. The market "pie" is expected to expand, accommodating both spot and futures funds alike.
From a market share perspective, there are absolutely enduring advantages to a futures-based ETF that will allow BITO to coexist and have a nice piece of the market for quite a long time,Hyman asserts.
However, not all market participants share this viewpoint. It's noteworthy that VanEck, which had initiated its spot Bitcoin ETF, decided to close its futures exchange-traded fund in January.