ProShares’ first Bitcoin ETF wants to get an exemption from the trading restrictions and many believe it is growing too fast for the Chicago Mercantile Exchange so let’s read more in today’s Bitcoin news.
Less than a week after the launch, ProShares’ first bitcoin ETF wants to change the way it runs the new futures ETF. ProShares CEO Michael Sapir said that Barron’s first company filed for an exemption from trading limits at the Chicago Mercantile Exchange where it buys futures contracts for its Bitcoin ETF and that ProShares will request permission to invest in other kinds of derivatives contracts. Bloomberg ETF analyst Eric Balchunas corroborated the news on Twitter and wrote:
“Barron’s article confirms what I’ve been hearing too, that ProShares is filing to be exempt from CME position limits AND they can use swaps if need-be. Both would obv be huge help to maintain exposure if $BITO keeps getting bigger.”
The CME caps the number of BTC futures contracts that expire in the same month as 2000. Proshares can hold 4000 contracts for November and about 5000 contracts overall. The company holds 2133 contracts for November and 1679 contracts for October which is 76% of its limit. The ETF invests 25% of Investors’ cash in the Cayman Islands subsidiary and then instructs that the subsidiary purchase Bitcoin futures on Chicago Mercantile Exchange so after launching, the ETF increased to more than $1 billion in assets under management.
Right now, ProShares invests the remaining 75% in treasury securities and the repo market so it also borrows money from the repo market to gain leverage on the investments. With the leveraged cash, the company invests in futures contracts and cash-settled bets on the future price of BTC. The fund does this no matter the condition on the market. If Bitcoin’s price goes up, Proshares profits from these bets and will use the profits to make and to borrow money from the money market to purchase the BTC futures. If BTC crashes, the company could lose the cash-settled bets and its pile of cash with BTC exposures shrinking.
Sapir said that ProShares is considering investing the remaining 75% in other things besides repo securities and treasury so it could invest in later-dated contracts, structured notes, or swaps as he said. ProShares described this in detail and the fund could consult with the SEC and invest in other products that correlate with the price of BTC as we all other cryptocurrencies. The company said that it could invest in stocks and could correlate with teh crypto market like with Riot miner or MicroStrategy.
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