Dec 1, 2023

ProShares' Bitcoin Strategy ETF hit a high of nearly $1.5 billion in assets under management this week, surging past a record set in 2021.

Video transcript

Pro shares, Bitcoin Strategy. ETF hit a high of nearly $1.5 billion in assets under management this week surging past a record set in 2021. Joining us now is Proshares Global Investment strategist Simeon Hyman. Welcome to the show, Simeon, thanks for having me. Nice to see you again. Now, what do you think is driving this renewed institutional interest here? I know everybody's talking about the uh progress towards spot ETF S but I think we should keep in mind that this rally started long before that it started all year long. And what's interesting is it started in and continues with some news flow. That's not great. Remember that in the first two thirds of this year, first of all, we had rising interest rates. So some will attribute part of this rally to the fall in interest rates, but that's only the low six weeks or so. We had this rally in the face of rising interest rates. We also had this rally in the face of what I might just call kind of hair on the exchanges. You got the shaggy hair guy in the courtroom, you got the finance guy you got all this stuff and I think that's posed an interesting challenge for investors because they're saying to themselves, well, we see this price go up but how exactly is it OK for me to get exposure to Bitcoin? So you, you brought up the exchanges and the, and the collapse of FTX and also the, the, the situation with finance, which it seems as if Binance might have a second life after all. Uh once uh once uh CZ is potentially uh on the wrong side of bars. But um here you have liquidity is an issue uh in these major exchanges. And at the same time, you're dealing with futures, I $1.5 billion in, in a um that seems to be about half of what the open interest is in the CME correct. What happens then if there is a spot, Bitcoin ETF what happens to the CME for instance, what happens to your, what happens to your A um You're pointing out some really important things and liquidity is so important. Uh The futures market is a really mature place and the volume that you're noting in CME futures that's actually larger than the U than the largest us Bitcoin spot exchange. So that's pretty powerful. And that's, you know, part of what we do is it's, it's us, but there's other, most of you, I mean, like it's about half of it's you, right. We, we, we're certainly something like, but there's a lot of, there's a lot of volume there that's not us too. And it's part of what my marketing guys tell me. I shouldn't say belt and suspenders, but I like it anyway because I'm old school. But look that it is a regulated place. CFTC. Is there margins pro posted clearinghouse when you put those futures in an ETF, you have those 22 layers of, of regulation that, you know, provide a powerful solution for folks. And that's what we think is driven uh some of this uh growth towards uh record assets in the fund. But, but what happens though? What, what happens if there's a, if there's a spot? ETF what happens to? Obviously, I I would suspect that your a um would go down what happens to CME liquidity at that point. So let, let's think this through for a minute. I think what you're also what you're bringing up here is what ultimately would be a greater maturation of the ecosystem which should be growth in all facets including futures. Remember that there are key aspects of the futures market that contribute significantly to this ecosystem. There isn't one price of Bitcoin, there are multiple prices. So the futures market actually, as as I'm sure some of your folks are aware, but we'll remind them CME futures are settled with a amalgamation of multiple exchange prices that's powerful. I mentioned the volume, but also there's academic evidence that price is reflected, it reflects information more quickly in the futures market. Think about it like C DS in the bond market, credit, the full swaps react faster than cash bonds. So what I'm suggesting is a takeaway is as the spot market matures, the futures market is likely to grow along with it coexist in a very healthy fashion. Of course, we also think that means that our futures based ETF coexists in a robust fashion. So I mean, I was gonna ask you if you were concerned that assets and volume would decrease when a spot ETF is approved. It sounds like you're not uh what is pro shares considering getting into the spot uh ETF race or launching one in the future. Should others don't have any comment on, on any of those specific plans? But, but I would remind everybody is that we do have a full suite of futures uh based strategies, not just Bito but eethe which is the Ethereum futures based ETF. Remember that's the number two Cryptocurrency and that's up 70 odd percent this year and it is different. It's got utility on in the Ethereum ecosystem. So it doesn't quite do exactly what Bitcoin does. And of course, we have the short uh futures exposure too with bit I bitty and set Seth. So we're pretty proud of the robust suite that we're offering today. Now, the last time we spoke about pro shares on the show, pro shares launched its first ETF that allowed investors to take a bearish view on Ether. How's that product doing? It's doing its thing. I mean, all, all, all of the ETF S are performing as expected. So we're, we're proud to offer the solutions and we think they're pretty robust. Do you have, do you have a profile of your buyers? I mean, do you know uh obviously the, the talk here is an ETF would, would open up uh crypto to institutional buyers who otherwise or, or sellers in the case of the short ETF S, um it would open up the uh crypto markets to uh institutional holders of crypto. What is the, but is that really happening or are these, are your buyers basically uh retail investors just looking for another way to trade on their 401 Ks or do whatever they wanna do? We look, we don't, we don't really know the exact makeup of, of, of the holders of our ETF S. What we suspect is, it's pretty diverse group of folks, you know, the ability to own and transact this ETF straight in a brokerage account is of course, makes that accessibility a lot, uh a lot easier to folks. Uh And we, we certainly, we suspect that there are people with varying time horizons and that's really important too because, you know, you may be a long term holder, but you also want some short term folks around to make sure that that liquidity in the ETF is there every day and those spreads are tight which they have been. So uh as best we can take it, we think it's a diverse group of folks with, with some diverse time horizons and, and that's healthy for uh for the, for the product and the offering. So, I mean, if you watch the show, you know, I love a good prediction. When do you think? Well, it sounds like you think we're going to get an approval for the spot, Bitcoin ETF. When do you think we'll see that? Yeah, I actually have no particular view on the regulatory front. I'm the strategy guy. So I won't, I won't make any predictions on that front. So I, in terms of, in terms of your uh going forward and, and products that you're making, I, I, are you looking at different ways to create baskets for uh investors uh that combine the different uh futures products that are out there? And uh you know, is there any demand for something like that for that kind of diversification? Or is it mostly, are you buyers basically pick and choose uh using mostly the, either the ETF, the, the E TT Fs or the BT C ETF? Well, thanks for bringing it up because I only mentioned four of the six tickers in our suite. And indeed, we did launch Beth, Beth and Bete Betty, which offer the combination of Bitcoin and Ether, either in market cap weight or equal weight choice So we do think there's some folks who want some one stop shopping. Remember that if we've learned anything over the last couple of years is that Cryptocurrency, both Bitcoin and Ether, they're volatile and they zig when other asset classes, zag that means you got to Sprinkle a little bit of that into a portfolio of traditional asset classes and it adds to the efficiency of your portfolio. So uh we do think there's some folks who are going to find the one stop shopping useful. And that rounds out our current suite offering of a half dozen uh Cryptocurrency alternatives.

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