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Spot Bitcoin ETFs saw intense interest in the first 6 months, with billions of dollars in net inflows. This situation caught everyone’s attention. Of course, an environment was created where companies issuing leveraged funds could also profit from this process. The first futures ETFs for BTC were approved at the end of 2021, so what does the latest move mean?
T-REX and Bitcoin
On July 10, investment managers REX Shares and Tuttle Capital Management made a significant move for risk-loving investors in crypto. The company launched two exchange-traded funds that double long and short positions. The full names of these funds are as follows:
- T-REX 2X Long Bitcoin Daily Target ETF (CBOE: BTCL)
- T-REX 2X Inverse Bitcoin Daily Target ETF (CBOE: BTCZ)
These funds are referred to as paper Bitcoin assets, and the cash flow is directed to derivative products rather than directly to BTC, so they do not have a significant impact on the spot price. The company, which does not hold BTC directly, will hold financial derivatives for these funds.
According to Farside Investors, roughly $650 million has flowed into BTC ETFs since July 5, even in the ongoing chaotic environment. In addition to REX Shares’ leveraged products with massive market values like Apple (AAPL), Nvidia (NVDA), and Tesla (TSLA), a new T-REX product has been added. The amount of assets under the company’s management has exceeded $5 billion. Since last year, $1 billion has flowed into T-REX funds.
Futures and Spot ETFs
There are already many alternative ETFs for Bitcoin. Investors can invest with much lower transaction fees with a spot ETF instead of a futures ETF. Of course, there are also entries into 2x leveraged BTC funds in a secure manner, but the approval of spot ETFs has managed to draw significant attention in already risky markets.
According to a report prepared by GSR Markets, leveraged ETFs perform significantly weaker compared to the underlying asset. The report states that this is partly due to a phenomenon known as the fixed leverage trap, where funds are forced to buy low and sell high to maintain a fixed leverage target. Management fees are not competitive with spot BTC ETFs.
