- CSOP Asset Management breaks new ground with ‘inverse’ Bitcoin ETFs.
- Risks are greater in betting assets will fall.
- New product joins long line of funds designed to profit from downturns.
Bitcoin is the most erratic asset in the last decade — and subject to wild price swings driven by speculation, news, and rumours.
That’s great for risk-hungry traders.
And it’s also the gist of the marketing pitch proffered by CSOP Asset Management, a Hong Kong firm, for a new crypto exchange-traded fund launched Tuesday.
Profit from downturns
The hook is that this ETF is designed to let retail investors short Bitcoin, which means profiting from its downturns.
This is why CSOP cast a spotlight on the risks in the world’s most valuable cryptocurrency.
Dubbed the CSOP Bitcoin Futures Daily (-1x) Inverse Product, the ETF is the latest in a long line of funds that let retail investors trade like hedge fund pros.
For years, ProShares and other US issuers have served up “inverse” ETFs that let retail investors short the Nasdaq 100 and the S&P 500 and other indexes.
Moreover, they let investors use leverage, which can pump up gains, or losses.
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Now CSOP is doing the same with Bitcoin, which tends to be far more volatile than stocks.
The fund works by tracking the performance of the nearest maturing monthly Bitcoin Futures contracts traded on the Chicago Mercantile Exchange. And it does not factor in leverage, which sophisticated investors tend to do on platforms such as BitMEX.
$79 million inflow
The launch comes at a time of heightened interest in inverse Bitcoin products.
In the first quarter, global futures-based Bitcoin inverse products recorded an inflow of $79 million, the highest since the second quarter of 2023, according to CSOP.
CSOP attributes this surge to uncertainties related to the upcoming US presidential election, potential supply issues, and the Federal Reserve’s monetary policy.
“When markets reel, Bitcoin’s drawdown could be even more prominent, suggesting more chances for short trades,” the company said.
After soaring 69% in the first quarter, Bitcoin has fallen 6%, according to CoinGecko.
The risks of shorting are usually greater than going long because the asset price can continue soaring indefinitely, which can compound losses.
CSOP, a joint venture between Chinese investment giant China Southern Asset Management and Oriental Patron, launched spot Bitcoin and Ether ETFs in Hong Kong in April, shortly after the US introduced its spot Bitcoin ETF in January.
Focused on issuing ETFs, CSOP has a total assets under management of almost $15 billion as of December.
Ether staking
Despite the fanfare, the Hong Kong rollout proved underwhelming.
Patrick Pan, the CEO of OSL, one of the issuers, recently told DL News that the product’s performance only reached 30% to 40% of their expectations.
Pan and other industry leaders are lobbying the Securities and Futures Commission to approve Ether staking. They say this move could improve the appeal of ETH ETF products.
Currently, the six spot ETFs manage $365 million in assets, according to data from The Block.
Got a crypto story? Get in touch with DL News’ Hong Kong correspondent at callan@dlnews.com