How Proshares Bitcoin Etf Went Bust Within Months Of Stellar Debut

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Cryp­tocur­ren­cies are crum­bling and the rout has sent investors in a bit­coin fund that had a stel­lar debut not long ago, look­ing for cov­er. The ProShares Bit­coin Strat­e­gy ETF (BITO) has shed over 35 per­cent in less than three months since its launch in Octo­ber last year.

The fund was, in fact, among the 10 worst per­form­ers in terms of returns over two months since its pub­lic list­ing, Bloomberg Intel­li­gence data analysed by Athana­sios Psarofagis showed at the end of last week.

Wor­ries over the rapid spread of the Omi­cron vari­ant of COVID-19, high­er infla­tion, and expec­ta­tions of mul­ti­ple inter­est rate hikes in the US this year have weighed down the cryp­to mar­ket. Bit­coin has lost over 40 per­cent from its all-time high of $69,000 scaled in Novem­ber 2021 and it is down 10.5 per­cent since the start of 2022.

ProShares Bit­coin ETF had gar­nered a record amount of $1 bil­lion, with­in two days of launch mak­ing it among the most suc­cess­ful debuts ever. It bagged the sec­ond spot on the turnover charts, just behind a fund with pre-seed invest­ment back­ing. But the doom began as quick­ly. The fund has not attract­ed a sin­gle pen­ny in invest­ments so far this year.

The fund does not invest direct­ly in bit­coin but is based on futures con­tracts. Due to reg­u­la­to­ry con­cerns, direct hold­ing of bit­coin by an ETF is not yet allowed.

Since the estab­lish­ment of the ProShares Bit­coin Strat­e­gy ETF, eight out of the top 10 cryp­tocur­ren­cies by mar­ket cap have tanked. Two have remained con­sis­tent only because they are sta­ble coins pegged to the US dol­lar (Teth­er & USD Coin).

The vol­ume of Bit­coin being trad­ed has also plum­met­ed in the last year. A Mes­sari com­pi­la­tion of Kaiko data showed the aver­age val­ue of trad­ed Bit­coin was cur­rent­ly at $4.8 bil­lion across exchanges against the pre­vi­ous year’s dai­ly trad­ed aver­age of $9.2 bil­lion. More­over, dur­ing the all-cryp­to mas­sacre, investors liq­ui­dat­ed $2.4 bil­lion in cryp­tocur­ren­cies, accord­ing to Coinglass.com.

Bit­coin futures open inter­est, which stood at $17.4 bil­lion in Octo­ber 2021, has now shrunk to $10.6 bil­lion, a 39 per­cent drop, per data from the Chica­go Mer­can­tile Exchange.

Despite the record pump­ing in of $1 bil­lion in funds with­in two days of its launch, the assets under man­age­ment of the ProShares Bit­coin Strat­e­gy ETF are still lan­guish­ing at around $1.2 billion.

The Fear and Greed Index of bit­coin indi­cates the worse may not be over yet for the cryp­to mar­ket. The index which shut­tles between 0 (Extreme Fear) and 100 (Extreme Greed), has fall­en low­er to 15 – sig­nalling extreme fear among cryp­to investors.
The polit­i­cal dis­tress in Kaza­khstan over the last week has only added to the dis­rup­tion, shak­ing the bit­coin mar­ket. The bulk of cryp­to min­ing activ­i­ties had shift­ed to Kaza­khstan after China’s ban on cryp­to min­ing in the country.

Despite all the devel­op­ments and under­ly­ing caus­es that have led to the under­per­for­mance of the ProShares Bit­coin Strat­e­gy ETF, Psarofagis believes its per­for­mance won’t nec­es­sar­i­ly have reper­cus­sions on the future indus­try growth. “You can see some oth­er ETFs had a rough start out of the gate but can still raise assets,” Bloomberg’s Psarofagis said, refer­ring to the list of the ten worst performers.

(Edit­ed by : Yashi Gup­ta)

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