Since the launch of 11 spot ETFs on January 11th in the U.S., the ProShares Bitcoin Strategy ETF (BITO) has experienced a significant decline in daily trading volume. On January 18th, BITO’s trading volume was over $500 million, a 75% drop from its January 11th peak of $2 billion.
During the same period, BITO saw more than $270 million in net outflows, according to ETF.com. In contrast, spot ETFs have recorded over $14 billion in cumulative trading volume since their inception, with inflows exceeding $1.2 billion in a single week.
Spot ETFs offer direct investment in cryptocurrency and ease the burden of storage issues, making them a preferred alternative to futures-based ETFs. BITO, which invests in CME BTC futures, faces “roll costs” due to the need to renew expiring contracts, negatively impacting the fund’s performance.
Despite this, the cash creation structure of spot ETFs could still allow futures-based ETFs like BITO to maintain a presence. The creation methods, in-kind and cash creation, are more commonly utilized in spot ETFs. This process remains the same except for authorized participants (APs) providing cash and the issuer purchasing the actual assets.
According to Coinbase’s head of institutional research, David Duong, BITO will continue to be “an integral part of the Bitcoin ETF space” despite the drop in volume. APs may continue to hedge their positions by purchasing BTC before the launch of spot ETFs and using BITO to “hedge potential client buys and sells throughout the day.”
