Since the launch of 11 spot ETFs in the US on January 11, the ProShares Bitcoin Strategy ETF (BITO) has seen a significant decrease in daily trading volume. According to data from the US-based major cryptocurrency exchange Coinbase, over $500 million worth of BITO shares changed hands on January 18, which is 75% below the record $2 billion on January 11.
BITO’s Trading Volume Plummets Following Spot ETF Launch
According to ETF.com’s data, during the same period, BITO experienced net outflows of over $270 million. Despite this decline, spot ETFs have recorded over $14 billion in cumulative trading volume since January 11 and saw inflows of over $1.2 billion in one week.
Spot ETFs offer the advantage of direct investment in cryptocurrency while also providing ease in dealing with storage issues, making them a significant alternative to futures-based ETFs. Particularly, BITO, which invests in CME BTC futures, has to renew contracts upon expiration, leading to “roll costs” that negatively affect the fund’s performance.
Nevertheless, the cash creation structure of spot ETFs could still allow futures-based ETFs to remain in existence. The methods of ETF creation, in-kind and cash creation, are more commonly used in spot ETFs. This structure remains the same except that authorized participants (APs) provide cash and the issuer purchases the underlying assets. According to some observers, APs are likely to be protected in the same way with regulated products like BITO.
“An Integral Part of the Bitcoin ETF Space”
According to Coinbase’s head of institutional research, David Duong, despite the drop in BITO’s volume, it will continue to be “an integral part of the Bitcoin ETF space.” Duong suggests that some APs might continue to hedge their positions by buying BTC before the launch of spot ETFs and using BITO “to hedge potential client buys and sells throughout the day.”
On the other hand, Bitcoin continues its downward trend following the launch of spot ETFs. Current data shows BTC trading at $40,921, down 1.82% in the last 24 hours.
