ProShares Bitcoin Strategy’s exchange-traded fund ETF (BITO), saw strong inflows over the past two weeks, pushing its Bitcoin (BTC), exposure to a new record.
No Bitcoin outflows despite ‘rollover’ risks
According to ProShares data, the fund had 28,450 BTC under management as of March 24, which is nearly 26,000 BTC less than a month ago.
As of March 24, 2022, ProShares Bitcoin ETF Holdings Source: Official Website
Interestingly, inflows were evident in the days preceding the “rollover” of BITO’s 3,846 future March contracts. This occurred in the week ending on March 25.
A rollover is when traders move their futures contracts to another contract as their expiry nears. This allows them to keep the same position.
BITO’s rolling times typically follow up with an increase of Bitcoin net outflows. Arcane Research, in its most recent report, stated that this was the case despite citing the last rolling period because of market uncertainty due to Russia-Ukraine conflict.
ProShares BITO AUM Source: Arcane Research
It also saw a 225 BTC inflow to its coffers on March 21 just like BITO rolled their 437 March contracts up to April. Arcane saw a growing institutional demand to the fund. In its report, it wrote:
“The large inflows to BITO indicate that Bitcoin appetite through traditional investments vehicles is growing.”
According to Glassnode, BITO saw consistent net inflows over the rest of the week.
ETFs for Bitcoin: Purpose Source: Glassnode
Bitcoin: $50K Next Month?
ProShares Bitcoin ETF increased inflows in conjunction with a rally on the spot BTC market March 25.
Daily chart of BTC/USD price. Source: TradingView
Bitcoin rose 2.5% to $45,000 on March 25, its highest level in more than three weeks. Alexander Mamasidikov is a cofounder of the crypto wallet service MinePlex and noted that Bitcoin’s price could rise to $50,000 in the future.
He told Cointelegraph that ProShares BTC ETF’s growth to 28,000 BTC was proof of active demand for a Bitcoin-linked exchange traded fund product.
“These price trends have had an impact on Bitcoin thus far, and a sustained accumulation of or investment from both institutional and retail investors is poised for the coin to establish strong support above $50,000 towards Mid-April.”
Grayscale is not loved?
Interestingly, ProShares Bitcoin EFT has been preferred by institutions to its rival Grayscale Bitcoin Trust(GBTC), which trades at a 25% discount from spot BTC.
Grayscale Discount chart to NAV. Source: YCharts
The problem with choosing GBTC over BITO lies in its continuing discount, which means that investors would continue to be at risk of spot Bitcoin underperforming at a higher rate than with BITO which trades at around 2% less than current BTC prices.
Despite this, there’s still a small chance that GBTC will emerge as a winner. Grayscale Investments, a New York-based investment company backing GBTC has expressed an interest in converting it into a spot Bitcoin-backed ETF. If this happens, GBTC’s 25% discount will return to zero.
Grayscale Investments BTC holding. Source: Coinglass
Ryan Wilday, a seasoned financial analyst, stated that “buying BITO shares guarantees that you will underperform Bitcoin” in a February analysis.
“Buying GBTC shares is likely to result in similar or worse performance than BITO with a very small chance of outsized performances in the event GBTC becomes a spot ETF.”
Related: Record GBTC Discount may cause $100K Bitcoin price increase — Analyst
A spot Bitcoin ETF application has never been approved by the U.S Securities and Exchange Commission, as BTC is susceptible to price manipulation.
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