Short sellers who think the cryptocurrency crash isn't over have got a new tool to bet on bitcoin's decline.
Financial institution ProShares on Tuesday launched the Short Bitcoin Strategy ETF (ticker BITI), the first reverse ETF tied to bitcoin in the United States. By tracking the performance of the bitcoin futures index in reverse, the ETF hopes to provide a relatively cheap and easy way for investors to profit from further declines in bitcoin.
BITI comes at a time when the cryptocurrency community is experiencing a bloodbell amid a sell-off in risky assets as the Federal Reserve aggressively raises interest rates to fight inflation. The scary thing is that in this sell-off, even long-time holders are cutting back.
Bitcoin briefly fell below the $20,000 mark this weekend before recovering. As of now, bitcoin is about 70% below its November high.
That means the new ETF may have missed the best opportunity to profit from bitcoin's plunge. But ProShares' idea is that making it easier to short Bitcoin will encourage more investors to express negative views on cryptocurrencies.
"We think there are a lot of investors who are short term or long term bearish on Bitcoin and cryptocurrencies in general, but don't act on their ideas because it's too difficult or too expensive," said Michael Sapir, CEO of ProShares. "These investors will be able to take short positions in Bitcoin just as easily as they would buy an ETF in a traditional brokerage account."
In October, ProShares launched the first BITcoin-linked ETF in the US, the Bitcoin Strategy ETF (ticker: BITO). The launch was an instant hit, but unfortunately the ETF's launch coincided with the peak of the digital asset boom and its subsequent decline.
BITI is understood to be the first short crypto ETF in the US. Horizons ETF launched the world's first short Bitcoin ETF last year, listing on Canada's Toronto Stock Exchange. ProShares rivals Direxion and AXS are also preparing to launch bitcoin shorting ETFs.
The cryptocurrency sell-off is likely to continue
Arthur Hayes, the former CEO of U.S. futures trading platform BitMEX, said recently that $20,000 represents a price support level for bitcoin that, if breached, would trigger "significant selling pressure."
Sam Callahan, a bitcoin analyst at Swan, a bitcoin exchange, believes that based on the experience of previous bear markets, bitcoin could fall more than 80% from its all-time high, which would mean bitcoin would fall to $13,800.
Jeffrey Gundlach, chief executive of DoubleLine Capital, known as the "new debt king," said last week that he wouldn't be surprised if Bitcoin fell to $10,000.