New Inverse BTC ETF

in LeoFinance25 days ago

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If there is added fuel for a potential increase in BTC price there must be two way action in trading. This is mainly how the general stock market has existed since the ability to buy or short stocks. For those who are new to shorting stock it basically means doing the opposite of buying a stock. Traders betting the stock price will drop will sell the stock at present value and hope for future value to drop and buy back the shares at a lower price. The whole process is call shorting the stock.

Coinbase No Shorting BTC But...

From the beginning of Coinbase creation up to its IPO the company only allows users to purchase cryptocurrency. This is basically a one way bet where prices can only go up. As we have went through the recent Covid pandimic and the multiple massive draw downs of cryptocurrency since BTC's creation in 2009 not one time would a crypto investor who is incline to want to bet BTC prices would fall was able to capitalize when this occurs. That is anyone using Coinbase.

Many crypto exchanges today have the capacity to allow leverage and short trading of cryptocurrency. Yet to the general public there has yet to be an entity to allow to short cryptocurrency. That will be changing very soon as finacial firm Horizontal ETF as of today have an ETF with ticker symbol BITI for traders/speculators to invest in if they want to bet on BTC price falling.

One Option to Short BTC

Unfortunately it is only on the Toronto Stock Exchange, but still it will be publicly traded and at 1x of what BTC prices would be if it fell.

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Straight out of Horizontal ETF's website is today's value of BITI. On the first full day of trading BTC price went up over two percent and hence BITI fell a little over 2%. Volume is lack luster as less than 10k were traded but then again this is not a well know product just yet.

Horizon's ETFs Web Link

Horizon's thoughts on giving investors a long and short opportunity for BTC:

“In launching HBIT and BITI, our goal is to provide investment tools that allow investors to get liquid access to the returns of bitcoin futures with the ability to go long or short the asset class, based on their outlook and conviction.”

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Conclusions

Earlier I mentioned there is potential benefits for BTC price for those who are short BTC. The most important benefit is that investor who shorts BTC will be obligated to purchase BTC back sometime in the future. This creates a demand for BTC even though they are betting against it. Very counterintuitive but that is part of how the free markets work.

Since BTC's inception it has been years since one public traded inverse fund on the token has been introduced and its just starting today. Yet BTC price went from fractions of a cent all the way up to as high as $63k USD and climbing. Imagine if speculators bet on the BTC price will fall but are trapped as momentum in price continues to rise. This creates something of a trading phenomal call short squeeze. Where speculators who shorted the asset is trapped with a losing position as the price continues to rise. Price rise can be infinite which sooner or later will force shorts to cover, essentially meaning buy back the BTCs at higher prices.

Example of a short squeeze would be what we saw with Gamestop shares, ticker GME, as of last December and January.

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In addition the BITI ETF although is an inverse ETF its market where it is traded is no where near that of the USA market. So the potential for a massive short squeeze is very possible if and when the USA markets deploy their own ETFs that are both long and short BTC and other cryptocurrency.

Shorting crypto will only add fuel to potential of an explosive move to the crypto market as it allows more investors who have bias opinions toward the asset to make their bets. More investors will mean more liquidity which in turn makes more interest. We are living in a very interesting time.

None of what I write is financial advice. It is for entertainment purposes only. Thanks for reading!


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Oh wow, very informative post. This is the first I've heard of this etf. Thanks !LUV

Glad you liked it.

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More derivatives and it personally isn't what I live. The decay from the inverse ones don't make sense but I also feel like triple or double leverage etfs will be next aat this rate.

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