In Bitcoin futures ETFs confidence wavers as contracts fall below $5,000

The falling price of Bitcoin since the ATH in mid-November may be one cause for the decline in interest in bitcoin futures ETFs.

After a successful debut, demand for the ProShares Bitcoin Strategy Exchange Traded Fund (BITO) has dropped to its lowest level since November 2021.

According to the fund’s most recent update from Jan. 11, the Bitcoin futures exchange traded fund (ETF) owns 4,904 Chicago Mercantile Exchange (CME) futures contracts. A Bitcoin futures ETF allows investors to bet on the future value of Bitcoin without having to hold the cryptocurrency directly.

The number of assets that Borrowell manages rose to $1.16 billion in November from $1.4 billion on Nov. 1, according to its website. This is roughly the same amount it held two days after its Oct. 18 debut, when it became the quickest mutual fund to reach $1 billion in AUM ever.

In its most recent Weekly Update, the Arcane Research project discussed several possible explanations for the BITO retrace. As you might expect, Bitcoin’s poor price performance over the previous two months is the main cause, as it continues to drift away from $69,000 it hit on November 10th and currently stands at around $43,700.

Another possible cause for the decrease in popularity of BITO is the significant cost involved with running a futures-based ETF, which necessitates rolling costs on a monthly basis to stay ahead of the current BTC price:

“BITO sells its front-month exposure to buy the next-month contract each time the contract approaches expiry.”

The potential of a Bitcoin ETF that is based on a spot price, according to Arcane, should be less expensive. Because the SEC has not yet approved any such ETFs, an approval from Fidelity Investments is anticipated by Jan. 20.

BITO’s failure to become the most popular Bitcoin ETF has been mirrored by its rivals’ failures to significantly boost their AUMs, which are a tiny fraction of the assets held in BITO. Valkyrie’s Bitcoin futures ETF (BTFD), which debuted shortly after BITO and currently holds $71.9 million, is following suit.

Even though the VanEck Bitcoin Strategy ETF (XBTF) has grown its AUM by $6 million since its November 16 debut, it currently holds just $15.8 million according to Dividend.com.

A bitcoin-tracking fund from Grayscale Investments called the Bitcoin Investment Trust (GBTC), which is available to accredited investors who must be worth at least $1 million and pay a 2% one-time fee for shares, currently holds around $1.5 billion. According To data from CryptoCompare, GBTC’s assets under management (AUM) dropped by approximately $10 million in November after it sold 590 BTC coins for roughly $2.6 million. The AUM drop was caused by costs and difficulties redeeming fiat money like US dollars for crypto assets like BTC coins and ethers (ETH).

The article shared by Crypto Tax Calculator concludes that the interest in Bitcoin future ETFs is declining. This might be due to a lot of people not understanding what they are, or when they will start trading on them, but it also could have something to do with the SEC’s ruling last week.

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