As Bitcoin volatility emerges in the market, some investors choose to transfer their funds to the ETF
Bloomberg ETF analyst Eric Balchunas has shared on his Twitter account the volumes of two Bitcoin futures exchange-traded funds that have received the highest volumes in two weeks, and the main reason might be the high volatility of the spot pairs.
Why Bitcoin ETFs Are Used
Bitcoin-backed ETFs are currently the only way for institutional investors to gain exposure to the cryptocurrency market in the United States. Other options are either limited or unavailable.
The volume of the two exchange-traded funds is usually correlated with spot Bitcoin trading pairs, but the volume on the cryptocurrency has not been outstanding, which means that investors might have used the ETF to avoid unnecessary volatility on the market.
BITO or ProShares Bitcoin ETF traded in volumes of $ 400 million, the highest number since mid-October, when the ETF was just listed.
High volatility on the crypto market
High volatility might be the main reason why investors choose to get exposure via ETF rather than the underlying asset or perpetual futures. Since BITO and BTF products are only available for trading during NYCE trading hours, this means that it avoids the immediate volatility spikes that occur in the cryptocurrency market which is still actively trading.
While Bitcoin ETFs might be an alternative for spot trading pairs, not all traders happily use them due to high roll costs. In order to properly track the price of the asset that investors receive exposure to, funds have to constantly buy and sell their holdings. In times of strong buying pressure, Bitcoin futures may trade at a premium to the actual asset.
With this issue, some traders might constantly overpay for their positions, which then creates up to a 20% annual loss due to roll costs and contango bleed.
