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Bitcoin futures trading took off around the run-up in cryptocurrency prices at the end of 2017.
Bitcoin, like other assets, has a futures market. In a futures trade, a buyer agrees to purchase a security with a contract, which specifies when and at what price the security will be sold. If you buy a futures contract, you are betting that the price of the security will rise; this ensures that you can get a good deal on it later. If you sell a futures contract, it suggests a bearish mindset and a prediction that Bitcoin will decline in price. In this context, you can short Bitcoin by purchasing contracts that bet on a lower price for the cryptocurrency.
Bitcoin futures trading took off around the run-up in cryptocurrency prices at the end of 2017. It is available on a wide variety of platforms now. You can short Bitcoin futures at the Chicago Mercantile Exchange (CME), the world’s biggest derivatives trading platform, and on cryptocurrency exchanges. Bitcoin futures can be purchased or traded on popular exchanges like Kraken or BitMEX and can also be found at popular brokerages such as eToro and TD Ameritrade.
The launch of thematic ETFs can often coincide with market peaks in sentiment for those specific sectors. Just look at ProShares. In October of last year, it launched its first futures ETF that went long on Bitcoin, called BITO. In just two days, it attracted more than US$1 billion in assets, making it the most successful ETF launch in the history of the industry, according to the company. The following month Bitcoin hit its all-time high at around US$69,000, and it has lost 70% of its value ever since.
Bitcoin ETFs had been seeing a lot of interest since they were first given the green light by the Securities and Exchanges Commission (SEC) last year, and while some of them have waned, they remain a good option for institutional investors wanting to bet on the digital asset but not hold any of it themselves. Following the success of the futures bitcoin, ETFs have come to the short bitcoin ETFs which have now begun to dominate the market.
The ProShares BITI ETF, popularly known as the first short bitcoin ETF in the United States has been making waves since its launch. Only a little over a week old, the ETF has garnered the favor of institutional investors who have flocked to take advantage of it. This has led to one of the fastest growth rates in the history of bitcoin ETFs given how quickly inflows have poured in. The BITI was reported to have made a splash just four days after launch which saw it become the second-largest bitcoin ETF in the country. As its popularity has grown, so have the investors flocked to it. It would do even better in its second week, setting a new record with the amount of BTC flowing in.
Early this week, BITI’s holdings climbed to a total of 3,811 BTC. Most of the inflows had come into the ETF towards the end of June where 700 BTC and 1,684 BTC had flowed into the fund on June 29th and 30th respectively. With this, BITI has barreled forward, and although it remains the second-largest BTC ETF in the region, it has put more gap between it and competitors such as Valkyrie and VanEck bitcoin futures ETFs. With $51 million said to have flowed into short BTC ETFs for the past week and setting a new record, it does seem to point to the fact that institutional investors are bearish on the future of bitcoin. However, this is only the case when it is looked at from one point of view.