ProShares' launch of the first Bitcoin ETF last year hit a record high, how will the inverse ETF market react?

As the market downturns, the ProShares fund management company has launched a Bitcoin inverse ETF, allowing traditional investors to short Bitcoin. It started trading on the New York Stock Exchange (NYSE) on 6/21. Additionally, Grayscale's GBTC, eager to transition to a spot ETF, has hit a new historical low premium. The SEC must decide whether to approve the spot ETF by 7/6.

BITI

Short Bitcoin Strategy ETF, ProShares' ProShares Short Bitcoin Strategy ETF, with the New York Stock Exchange ticker symbol BITI, applied for in early April this year, similar to the timing of a similar product application by leveraged ETF provider Direxion, but there has been no update on Direxion's application progress.

Last October, ProShares launched the first Bitcoin ETF in the United States, "BITO," and Bitcoin subsequently reached a historical high of $69,198 on 11/10 on Binance. Investors who still hold Bitcoin spot should be praying that "BITI" does not have a similar impact on the market.

ProShares CEO Michael L. Sapir stated:

As recent market trends have shown, the price of Bitcoin may decrease again, and BITI provides potential profit and hedging opportunities for investors expecting Bitcoin to fall.

In addition, Horizons ETFs also listed long and short Bitcoin ETFs on the Toronto Stock Exchange in April this year.

GBTC Discount

Struggling with a severe discount, GBTC is actively seeking to transform into the first Bitcoin "spot" ETF in history, with data showing that GBTC's discount has fallen below 34% for the first time.

Although the discount on GBTC represents the ability for investors to indirectly invest at a lower price without actually holding Bitcoin, since the end of February last year, the discount has continued to deepen, apparently indicating a lack of interest from investors in highly volatile assets with a significant discount but a six-month lock-up period.

In May, it was reported that Grayscale, the asset management institution, had a private meeting with the U.S. Securities and Exchange Commission (SEC) to negotiate the transition of GBTC to a Bitcoin spot ETF. According to Grayscale's report at the time, transitioning to a spot ETF seemed to be the only solution to mitigate GBTC's discount.

The SEC currently rejects all spot ETF applications. Last October, the SEC sought public opinion on the transition of GBTC to a Bitcoin spot ETF and set the final deadline for Grayscale's spot ETF application on July 6 this year.