Cryptocurrencies had a great year in 2021. In this period, we have seen the market go from being classified as a billion-dollar economy into a trillion-dollar economy. Aside from that, cryptocurrencies are gaining visibility in the mainstream world with, for example, El Salvador's adoption of Bitcoin as the official digital currency. As a result, investors are looking for the "new Bitcoin" on the market, hoping to find a great alternative in so-called altcoins. Unfortunately, many traders value an altcoin exclusively…
December of 2021 wasn’t kind to crypto, and it shows on the derivative markets. ProShares Bitcoin Strategy ETF – the first Bitcoin ETF to arrive in the United States – is now one of history’s worst-performing issuers two months after listing. This is despite a euphoric start, during which the fund was the NYSE’s second most excellent opening-day performer of all time.
Bullish Opening, Bearish Aftermath
As reported by Bloomberg, BITO ranked as a top ten worst performing issuer when measured two months after its October launch. It suffered a 30% drop as of December 19th and a 34% drop yesterday. That’s the 9th worst 2-month performance – with POTX ranked 1st, down 38% after its 2019 inception.
The drop is a direct consequence of the crypto market decline over the final stretch of 2021. After Bitcoin reached an all-time high at $69k but began a slow and steady decline afterwards. Following a series of cascading liquidations, the price now hovers below $42k, while the market sentiment is at its lowest since July.
This was surprising, considering that BITO’s launch was heralded as a bullish market event. Though a futures product, it marked the first US Bitcoin ETF following great difficulty with the SEC. Many – including Microstrategy CEO Michael Saylor – thought tremendous money would flow into the asset after it approved an ETF.
“Timing can be tough sometimes with ETFs,” said Athanasios Psarofagis, data analyst for Bloomberg Intelligence. “You aren’t hearing much about the performance flop of BITO since it went live.”
Not a Death Sentence
Bitcoin hasn’t been below $50k since October, when there was a rally anticipating BITO’s launch. Launch day was highly successful, pulling in the second-highest first-day returns in NYSE history. However, the product started approaching its contract limit within only days. Subsequent Bitcoin ETFs failed to pull in nearly as many returns.
This week alone, the ETF is down 9%. It hasn’t seen a single joyous day since the start of the year.
Nevertheless, Psarofagis thinks the ETF can still see success in the future.
“You can see some other ETFs had a rough start out of the gate but can still raise assets,” he said, referencing his list.
Bloomberg Intelligence still considers Bitcoin an “enduring bull market,” going into 2022, spelling potential optimism for BITO.