Bitcoin’s 70% Surge Fuels an ETF Showdown Between Bulls and Bears

Bitcoin’s dominant showing in 2023 is leaving exchange-traded fund investors divided on what’s next for the world’s biggest cryptocurrency.

The $149 million ProShares Short Bitcoin Strategy ETF (ticker BITI), which tracks the inverse performance of Bitcoin, has absorbed more than $118 million so far this year despite a 47% drawdown. That’s a bigger haul than its bullish — and much bigger — sibling, the $1 billion ProShares Bitcoin Strategy ETF (BITO), which has attracted $89 million amid a 60% surge this year.

The flow dynamic across the two ProShares products highlights the apprehension around Bitcoin’s eye-watering rally, having surged 70% so far this year. Turbocharged by optimism that the Federal Reserve’s tightening cycle is nearing its end, combined with the recent turmoil in the global banking sector, it has easily outperformed every other asset class in the first quarter.

Still, given Bitcoin’s speculative nature as well as its lack of traditional fundamentals and valuation metrics, investors seem unsure which way the coin may move next.

“It reflects uncertainty when you have roughly half the market participants go long and half of them go short,” said Chris Gaffney, president of world markets at TIAA Bank. “It shows that nobody really knows where we’re going.” That uncertainty will likely lead to more volatility, he added.