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The ProShares Bitcoin Strategy ETF (BITO), a prominent bitcoin futures-based exchange-traded fund (ETF), has experienced a significant downturn in its trading volume. Since the launch of the spot Bitcoin ETF in the United States on Jan. 11, BITO’s daily trading volume has plummeted by 75%. This shift marks a notable change in investor preference within the cryptocurrency market.
Surge in Spot Bitcoin ETF Popularity
Spot ETFs, which directly invest in bitcoin, have quickly captivated the market’s attention. In their first week of trading, these ETFs amassed a cumulative volume of $14 billion, surpassing the total volume of all other ETFs launched in 2023. With over $1.2 billion in investor funds, a spot Bitcoin ETF offers a more straightforward approach to bitcoin investment, avoiding the complexities associated with futures-based ETFs like BITO.
Despite the decline in BITO’s trading volume, industry experts believe that futures-based ETFs will maintain their significance in the market. This belief stems from the cash-creation structure of spot ETFs, which exposes authorized participants (APs) to bitcoin price fluctuations. To mitigate this risk, APs are likely to continue using regulated products such as BITO and CME futures for hedging purposes.
Expert Insights on Market Dynamics
Laurent Kssis, a crypto trading adviser and former ETF market maker, highlights that APs often rely on regulated products like BITO to hedge their positions. David Duong, head of institutional research at Coinbase, also notes that despite the recent volume decline, BITO will remain an essential component of the bitcoin ETF landscape, especially for broker-dealers who prefer regulated hedging methods.
The introduction of spot ETFs has undoubtedly shifted the focus within the ETF market, but futures-based ETFs like BITO continue to play a vital role. This evolving landscape reflects the diverse strategies and preferences of investors in the cryptocurrency space, highlighting the dynamic nature of investment vehicles in this sector.
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