- Inverse ETFs aim to deliver the opposite performance of their reference index, typically on a daily basis.
- BITI is like holding a short position to profit from or hedge against falling prices in Bitcoin futures.
Definition of Inverse Bitcoin ETF
An Inverse Bitcoin ETF is a special type of investment fund that allows people to make money when the price of Bitcoin goes down. It works by trying to do the opposite (inverse) of what Bitcoin’s value does each day.
BetaPro Inverse Bitcoin ETF (BITI)
The BetaPro Inverse Bitcoin ETF (BITI) is the first ETF of its kind. Its job is to give investors the chance to profit when the price of Bitcoin falls. It started doing this on April 14, 2021.
In simple terms, if Bitcoin goes down, BITI aims to go up, and if Bitcoin goes up, BITI may go down. It’s like a tool for people who think Bitcoin’s price will drop, and they want to try and make money from that idea. However, it’s important to know that these kinds of investments come with risks, so it’s not for everyone.
How BITI (Inverse Bitcoin ETF) Works
BITI is designed to move in the opposite direction of Bitcoin’s daily performance. Instead of directly investing in Bitcoin, it gains exposure to how Bitcoin futures are doing in the market.
- Inverse Performance: BITI aims to do the opposite of what Bitcoin does each day. If Bitcoin’s value goes down, BITI seeks to go up, and vice versa.
- No Direct Bitcoin Investment: Unlike buying actual Bitcoins, BITI doesn’t directly invest in Bitcoin itself. Instead, it focuses on the performance of Bitcoin futures.
- Tracking and Index: BITI follows a special index based on the CME CF Bitcoin Reference Rate. This index reflects the returns from Bitcoin futures, which are contracts that predict the future price of Bitcoin.
- Using Futures Contracts: BITI’s strategy involves using Bitcoin futures contracts traded on the CME Futures Exchange. These contracts are agreements to buy or sell Bitcoin at a predetermined price in the future.
Investing in BITI
1. Choose a Brokerage Account
- To invest in BITI, you’ll need to have a brokerage account. You can choose a reputable online brokerage that offers access to the Toronto Stock Exchange (where BITI is traded).
2. Fund Your Brokerage Account
- Deposit funds into your brokerage account. This is the money you’ll use to buy BITI shares.
3. Research BITI
- Before investing, take the time to research BITI. Understand how it works, its objectives, risks, and its historical performance. This information is often available on the ETF issuer’s website or your brokerage platform.
4. Ticker Symbol
- Find the ticker symbol for BITI. This is the shorthand code used to identify the ETF on the stock exchange. For BITI, it’s essential to use the correct ticker symbol when placing an order.
5. Place an Order
- Access your brokerage platform, and look for the option to place a trade or buy securities.
- Enter the ticker symbol (BITI), the number of shares you want to buy, and set any other parameters your brokerage requires (like order type and duration).
6. Review and Confirm
- Before finalizing the trade, review your order details to ensure accuracy. Confirm the number of shares, the price, and any other relevant information.
Considerations
1. Substantial surge in ETF activity
- Explanation: Recently, there has been a significant increase in the creation and popularity of Bitcoin Exchange-Traded Funds (ETFs). These are investment funds that track the value of Bitcoin.
- Why it Could Lead to Price Increase: The widespread availability of ETFs makes it easier for more people to invest in Bitcoin. If many investors start buying Bitcoin through ETFs, it can create higher demand, potentially driving up the price.
2. Bitcoin Halving in April 2024
- Explanation: Bitcoin experiences a process called “halving” approximately every four years. During this event, the reward that Bitcoin miners receive is reduced by half. The next halving is expected in April 2024.
- Why it Could Lead to Price Increase: Historically, Bitcoin halvings have been associated with a reduction in the supply of new Bitcoins entering the market. With a lower supply, if demand remains constant or increases, it can push prices higher due to the basic economic principles of supply and demand.
3. Historically Highest Price After Halving
- Explanation: Previous Bitcoin halving events have been followed by periods of significant price increases, reaching historical highs.
- Why it Could Lead to Price Increase: The historical pattern suggests that after each halving, Bitcoin has experienced a bull market, with prices reaching new peaks. Investors may anticipate a similar trend after the upcoming halving, contributing to positive sentiment and potential price growth.
4. Strong Year in 2023
- Explanation: Bitcoin had a robust performance in the year 2023, indicating a period of positive market activity.
- Why it Could Lead to Price Increase: Continued positive momentum from the previous year might attract more investors. Positive sentiment often encourages more buying activity, potentially leading to an increase in Bitcoin prices.
5. Store of value in times of recession
- Explanation: Bitcoin is sometimes considered a “store of value,” similar to gold. During economic uncertainties or recessions, some investors turn to assets like Bitcoin as a hedge against traditional financial market risks.
- Why it Could Lead to Price Increase: If there are concerns about a possible economic downturn, investors may seek alternative assets that are not directly tied to traditional financial markets. Bitcoin, perceived by some as a store of value, could see increased demand during uncertain times, potentially leading to a price increase.
Disclaimer
This information is provided for general informational purposes only and should not be construed as investment advice. It is not intended to induce or encourage investment decisions. Any investment involves risks, and individuals should conduct thorough research and seek professional advice before making any financial decisions. The content is not a guarantee of future results, and past performance is not indicative of future performance. The user assumes full responsibility for any actions taken based on the information provided. Always consider your financial objectives, risk tolerance, and consult with a qualified financial advisor before making investment decisions.
This information is provided for general informational purposes only and should not be construed as investment advice. It is not intended to induce or encourage investment decisions. Any investment involves risks, and individuals should conduct thorough research and seek professional advice before making any financial decisions. The content is not a guarantee of future results, and past performance is not indicative of future performance. The user assumes full responsibility for any actions taken based on the information provided. Always consider your financial objectives, risk tolerance, and consult with a qualified financial advisor before making investment decisions.