As Bitcoin volatility emerges in the market, some investors choose to transfer their funds to the ETF
- Why Bitcoin ETFs Are Used
- High volatility in the crypto market
Eric Balchunas, analyst at Bloomberg ETF, a share on his Twitter account the volumes of two Bitcoin futures exchange-traded funds that received the highest volumes in two weeks, and the main reason could be the high volatility of the spot pairs.
Why Bitcoin ETFs Are Used
Bitcoin-backed ETFs are currently the only way for institutional investors to gain exposure to the cryptocurrency market in the United States. Other options are either limited or unavailable.
$ BITO and $ BTF both saw their highest volumes in about two weeks. $ BITO with $ 400 million traded which is not just a ton but = 25% turnover in a day which indicates its use as a trading tool. pic.twitter.com/ukDGeSEa6F
– Eric Balchunas (@EricBalchunas) November 10, 2021
The volume of the two exchange-traded funds is generally correlated with the spot Bitcoin trading pairs, but the volume of the cryptocurrency has not been exceptional, meaning that investors may have used the ETF to avoid a unnecessary volatility in the market.
BITO or ProShares Bitcoin ETF traded in volumes of $ 400 million, the highest number since mid-October, when the ETF was just listed.
High volatility in the crypto market
High volatility could be the main reason why investors choose to gain exposure through the ETF rather than the underlying asset or perpetual futures. Since BITO and BTF products are only available for trading during NYCE trading hours, this means that it avoids the immediate volatility spikes that occur in the cryptocurrency market which is still actively trading.
While Bitcoin ETFs can be an alternative for spot trading pairs, not all traders willingly use them due to the high rolling costs. In order to properly track the price of the asset to which investors are exposed, funds must constantly buy and sell their holdings. In times of strong buying pressure, Bitcoin futures may trade at a premium to the actual asset.
With this problem, some traders can consistently overpay for their positions which in turn creates up to 20% annual loss due to rollover costs and contango bleeding.