Three days after listing, trading volume is lackluster. The first-ever leveraged BTC ETF in the US did not have a good start.

Three days after listing, trading volume for the first-ever leveraged BTC ETF in the US was lackluster.

Listing | Odaily Star Daily

Author | Odaily Qin Xiaofeng

The first leveraged cryptocurrency ETF in the United States has been on the market for three days and the performance is below expectations.

On June 27th (this Tuesday), American ETF issuer Volatility Shares Shares Shares is a social investment application that helps people accumulate wealth through a community of peers and experienced investors. Shares are now available on the App Store and Google Play in the UK, Poland and Belgium. See more listings for “2x Bitcoin Bitcoin is the first successful internet currency based on peer-to-peer technology; that is, no central bank or authority participates in the transaction and production of Bitcoin currency. It was created by an anonymous individual/team named Satoshi Nakamoto. The source code is publicly available as an open source project, and anyone can view it and participate in the development process. The design purpose of Bitcoin is to create only 21 million BTC. Bitcoin uses the SHA-256 hash algorithm and the average transaction confirmation time is 10 minutes. See more Strategy ETF “(2x leveraged Bitcoin strategy ETF) officially landed on the BZX Exchange under CBOE and started trading.

According to the monitoring of the Odaily Star Daily, 110,000 shares were issued on the first day of the line, with an issue price of $15, a net asset value of $1.65 million, and a first-day turnover of $5.5 million, which is the best among the encrypted ETFs issued this year. (Odaily note: The first-day turnover of Southern Dongying BTC futures ETF was only 830,000 US dollars, and Samsung Bitcoin ETF was only 98,000 US dollars).

However, in the following two trading days, the trading volume of Volatility’s leveraged Bitcoin ETF began to plummet, with a daily turnover of less than $300,000-only 21,768 shares were traded yesterday (29th), with a turnover of $234,000; its ETF The issue volume gradually increased, and the current circulating stock is 370,000, and the net asset value has increased to $5.7 million, as shown below:

What is a leveraged Bitcoin ETF? According to the application submitted by Volatility Shares to the SEC, the investment result sought by the ETF issued this time is equivalent to twice the daily excess return of the S&P CME Bitcoin Futures Roll Index (referred to as the “Roll Index”). For example, if the Roll Index rises by 1% per day, the net value of the ETF needs to rise by 2%. If the Roll Index falls by 1%, the net value of the ETF falls by 2%.

The “roll index” is used to measure the performance of the CME Bitcoin futures market, and is rebalanced daily between the current month futures contract and the next month futures contract. Simply put, the daily roll index of CME’s Bitcoin futures is basically the same as the CME Bitcoin futures index in terms of data and trend – both are influenced by the price trend of Bitcoin spot.

Therefore, the leveraged ETF issued this time actually has the same benchmark index as the previously issued Bitcoin futures ETF, which is futures data.

In order to achieve the goal of 2x returns, the ETF will set up a wholly-owned subsidiary with 25% of the total fund assets to invest in CME Bitcoin futures (become the long side); the remaining assets will be directly invested in cash, cash-like instruments or high-quality securities, including US government securities, money market funds, corporate debt securities, etc. These assets will be used to provide liquidity in the future or as margin.

The official website shows that the leveraged ETF currently holds $10.708 million worth of CME Bitcoin futures contracts expiring on July 23, $626,000 worth of CME Bitcoin futures contracts expiring on August 23, and $5.69 million in cash equivalents. In terms of proportion, the total futures position is exactly twice the net asset value of the fund, which can meet the requirements of the 2x leverage risk exposure.

However, the author still believes that the market size of this leveraged ETF will not increase significantly.

First of all, the issuance node is not good, and the homogeneous product does not have a bright spot. The 2x leveraged ETF is essentially still a futures ETF, and the US market has already issued multiple Bitcoin futures ETFs in the past two years, such as ProShare, VanEck, Valkyrie, and Hashdex. CME has also launched Bitcoin futures, and Volatility Shares as a latecomer seems to have little advantage, as can be seen from the trading volume in the past two days.

Furthermore, management fees are an important factor that directly impacts investors’ choices, and Volatility Shares’ management fees are relatively high among ETFs. According to Odaily Star Daily statistics, the highest management fee in the ETF market is currently held by the Southern Dongying Bitcoin Futures ETF, reaching 2%. In the past two years, the management fees of ETFs launched in the United States and Canada are generally around 1%, while Volatility Shares has a high management fee of 1.85%, which is not attractive.

Finally, the failure cases of leveraged ETFs also sound the alarm for Volatility Shares. As early as April 16, 2021, the world’s first cryptocurrency leveraged ETF-Beta Beta BETA token corresponds to the LED pixel on the space art display, and is broadcasted from the satellite as part of the Geometric-1 Earth orbit mission and DOGE-1. Part, will be placed in LEO in October 2022 as part of the mission to the moon. The pixel tones (KAPBlocking), brightness (GAMMA), X-axis (BETA), and Y-axis (RHO) positions are obtained in exchange for the above tokens and time (XI). View more Pro Bitcoin ETF (code: HBIT) has been listed on the Toronto Stock Exchange. After going online, the ETF’s market performance was sluggish, with an average daily trading volume of only 5769 shares (trading volume of 100,000 US dollars) in the past year, and a total asset size of only 3.76 million US dollars. In mid-April of this year, the issuer Horizons finally shut down the ETF.

There are certainly limitations in the Canadian financial market itself, but at the same time, it also verifies that leveraged ETFs do not have higher development potential, especially when compared with two spot ETFs launched in Canada at the same time-Purpose Purpose is to establish a token based on the ERC-20 token standard, allowing people to contribute to its altruistic goals by holding it. Its main feature is that it can generate a second token called DUBI (Decentralized Universal Basic Income), which is supported by a large activist community and an independent volunteer development team. They work together to increase the value of DUBI and gradually distribute it to the world’s population. The distribution will be promoted on the chain through a quota contract, which grants each individual DUBI with a ratio output that can be set equal to 1 to 100 purposes. This process also includes optional automatic taxation to ensure government compliance. View more BTC spot ETF (US$85.13 million) and 3iQ 3iQ View more BTC spot ETF (US$77.95 million) are enough to prove that cryptocurrency spot ETFs have higher attractiveness to investors, which is also the reason why BlackRock, Fidelity, ARK Investment, and other traditional investment institutions have applied for Bitcoin spot ETFs in droves.

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