The $1.47 billion ProShares Bitcoin Strategy ETF, the first U.S. bitcoin-linked ETF, could see its assets under management cut in half within a year of the first U.S.-listed spot bitcoin ETFs coming to market, one analyst predicted.
"If I had to guess, it would see a cut in half of both assets and volume in the first year," said Bloomberg Intelligence Senior ETF Analyst Eric Balchunas.
The fund, known by the ticker symbol BITO, reached $1.47 billion in assets under management on Nov. 28, a level that according to ProShares surpassed the ETF's previous high of $1.44 billion set in December 2021.
"We believe this speaks to the demand for a familiar, accessible and regulated way to target the returns of bitcoin," said Simeon Hyman, global investment strategist at ProShares, in a statement issued Nov. 29. "BITO's average daily trading volume of ($160 million) since inception puts it in the top 5% of all U.S. ETFs."
Launched in October 2021, BITO reached more than $1 billion in assets by the end of its second trading day. As of Sept. 30, the ETF, which invests in bitcoin futures – not in bitcoin directly – ranked as the world's largest bitcoin-linked ETF, according to a fact sheet available on ProShares' website, which cited Bloomberg data.
BITO has attracted $438 million in net inflows this year through Nov. 24, according to information provided by ProShares. The two weeks ended Nov. 10 accounted for more than half of those net inflows as $224 million poured in, the most of any two-week period since the start of 2022.
Spot bitcoin ETF coming
During the two weeks ended Nov. 10, $2.7 billion worth of BITO shares traded, the third-highest of any two-week period for the ETF in terms of dollar volume since the start of 2022, ProShares said.
"When an ETF gets really liquid as BITO has always been, it typically will attract traders and institutions, so I think this is people just doing a short-term trade ahead of the approval," said Balchunas, referring to expectations that the Securities and Exchange Commission will approve a spot bitcoin ETF.
Bloomberg Intelligence sees a 90% chance that the SEC will approve a spot bitcoin ETF by January 2024, a forecast linked to a deadline associated with an application for the ARK 21Shares Bitcoin ETF, the analyst confirmed.
Those adding shares of BITO are likely expecting a stream of positive news in the run up to what they anticipate will be the SEC's approval, and "people piling into BITO think that news will be good for bitcoin," Balchunas said.
"I don't know when they plan to exit, but they're just looking to make a quick buck," he said.
What does ProShares think will happen with BITO once U.S.-listed spot bitcoin ETFs arrive?
"I think we very strongly feel that the two will co-exist," Hyman said in an interview.
Among the reasons Hyman believes that a futures and a spot bitcoin product will be able to co-exist in "perhaps a very robust way" is what he likes to call "belt and suspenders."
"The futures market is a regulated place, and putting a regulated thing in an ETF is two levels of protection if you will," he said.
ProShares manages $68.1 billion in total AUM as of Nov. 28, including $64.5 billion in ETF assets.
