Inflows to the ProShares Bitcoin Strategy exchange traded fund (ETF), (BITO), have driven its Bitcoin ( BitcoinTC_) exposure at a new record high in the past two week.
No Bitcoin outflows despite ‘rollover’ risks
The fund uses futures contracts to get exposure to Bitcoin’s price movements. It had a record 28,450 BTC under management as of March 24, compared to almost 26,000 BTC a month earlier, according to official ProShares data.
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 March futures during the week ending 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, noted that this was the case for the latest rolling period, which was due to market uncertainty caused in part by the 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.”
BITO saw consistent net inflows throughout the week, according to additional data provided by Glassnode.
Purpose Bitcoin ETF flows. Source: Glassnode
Bitcoin: $50K Next Month?
ProShares Bitcoin ETF increased inflows in conjunction with a rally on the spot BTC market March 25.
BTC/USD daily price chart. Source: TradingView
Bitcoin rose 2.5% to $45,000 on March 25, its highest level in more than three weeks. Alexander Mamasidikov is a co-founder and CEO of CryptoWallet Service MinePlex. He noted that BTC could rise to $50,000 the next.
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?
It is interesting to note that institutions have chosen ProShares Bitcoin Trust over its competitor Grayscale Bitcoin Fund (GBTC), which has been trading at a 25% discount on spot BTC.
Grayscale Discount to NAV chart. Source: YCharts
The problem with choosing GBTC over BITO lies in its discount continuing to grow. This 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
“Buying BITO shares will guarantee you outperform Bitcoin,” stated Ryan Wilday (a veteran financial analyst) 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.”
Similar: Recorded GBTC Discount may cause $100K Bitcoin price increase — Analyst
The U.S. Securities and Exchange Commission has never approved a spot Bitcoin ETF Application. They believe that BTC is susceptible to price manipulation.
These views and opinions are the author’s and do not necessarily reflect those of Cointelegraph.com. You should do your research before making any investment or trading decision.
