Ben Strack

<div id="highlights-block_631770de82bf3" class="highlights">
 <ul>
 <li>Ethereum products see slight outflows ahead of the Merge</li>
 <li>Assets under management in crypto products declined to roughly $28 billion, its lowest level since early July</li>
 </ul>
 
</div>



Despite continued low trading volumes and declining assets under management in crypto investment products overall, money going into the budding short bitcoin offering space reached an all-time high.



Crypto investment products had roughly $9 million in inflows last week, according to a Tuesday report by CoinShares, stopping a three-week run of outflows. Negative sentiment was highest in the US, which saw relatively flat flows masked by a record $18 million into products betting against bitcoin.&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="695" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/09/Crypto-flows-Chart-for-Sept.-6-story-1024x695.jpg" alt="" class="wp-image-30236" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/09/Crypto-flows-Chart-for-Sept.-6-story-1024x695.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/Crypto-flows-Chart-for-Sept.-6-story-1024x695.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/Crypto-flows-Chart-for-Sept.-6-story-1024x695.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/Crypto-flows-Chart-for-Sept.-6-story-1024x695.jpg?w=379 379w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/Crypto-flows-Chart-for-Sept.-6-story-1024x695.jpg?w=385 385w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/Crypto-flows-Chart-for-Sept.-6-story-1024x695.jpg?w=323 323w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/Crypto-flows-Chart-for-Sept.-6-story-1024x695.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/Crypto-flows-Chart-for-Sept.-6-story-1024x695.jpg?w=50 50w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/Crypto-flows-Chart-for-Sept.-6-story-1024x695.jpg?w=1500 1500w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source: CoinShares</figcaption></figure>



Short bitcoin investment products now have $158 million in assets under management — a new high — according to the report. The largest such fund is ProShares’ Short Bitcoin Strategy ETF (BITI), which <a href="https://cms.blockworks.co/proshares-to-launch-first-us-etf-thats-bearish-on-bitcoin/" target="_blank" rel="noreferrer noopener">launched in June</a> after bitcoin’s price plummeted to less than $20,000.&nbsp;



BITI was up 20% from a month ago, as of Tuesday at 11:00 am ET, as bitcoin’s price was just above $19,800. The fund has roughly $90 million in assets under management, according to ETF.com.



Crypto investment products in Canada, Brazil, Switzerland and Germany saw slightly higher inflows than those in the US.



“This follows the recent FOMC meeting at Jackson Hole where a much more hawkish view was expressed, unexpected by some investors,” CoinShares Head of Research <a href="https://www.linkedin.com/in/james-butterfill/?originalSubdomain=uk" target="_blank" rel="noreferrer noopener">James Butterfill</a> said in the report.&nbsp;



<a href="https://cms.blockworks.co/cryptos-equities-slide-as-traders-unpack-powells-jackson-hole-remarks/" target="_blank" rel="noreferrer noopener">Federal Reserve Chair Jerome Powell said</a> during the Aug. 26 event that there is still a long way to go before sustained price stability is reached. Some analysts predict another 75 basis point rate hike this month.&nbsp;



Despite additions to short bitcoin products, offerings focused on bitcoin and ether had about $11 million and $2 million of outflows, respectively.&nbsp;&nbsp;&nbsp;



Butterfill said last week that investors have apparently decided to wait for <a href="https://cms.blockworks.co/tag/ethereum-merge" target="_blank" rel="noreferrer noopener">Ethereum’s upcoming Merge</a> — the blockchain’s move from proof-of-work to proof-of-stake — before adding to positions.



Last week’s trading volumes in crypto investment products hovered around $900 million, <a href="https://cms.blockworks.co/trading-volume-in-crypto-investment-products-hits-2-year-low/" target="_blank" rel="noreferrer noopener">similar to levels seen last week</a> — the lowest since October 2020.



Recent price declines pushed assets under management in crypto products to roughly $28 billion, their lowest point since early July. Such offerings managed about $64 billion in assets at the start of the year.



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Investment Products Shorting Bitcoin See Record Inflows

<div id="highlights-block_62509aac252fa" class="highlights">
 <ul>
 <li>Direxion originally filed to launch its Bitcoin Strategy Bear ETF in October but withdrew the application</li>
 <li>AXS Investments’ Short Bitcoin Strategy fund would be the firm’s third ETF in the US</li>
 </ul>
 
</div>



After ProShares <a href="https://cms.blockworks.co/proshares-plans-etf-mutual-fund-betting-against-bitcoin/" target="_blank" rel="noreferrer noopener">filed earlier this week</a> to launch an ETF that would allow investors to essentially bet against bitcoin, two other fund issuers followed suit.



AXS Investments revealed its plans to launch a Short Bitcoin Strategy ETF (SBCO) in a Wednesday <a href="https://www.sec.gov/Archives/edgar/data/1587982/000139834422007061/fp0074776_485apos.htm" target="_blank" rel="noreferrer noopener">regulatory disclosure</a>. The product seeks investment results corresponding to the inverse (-1x) of the return of the CME CF Bitcoin Reference Rate for a single day.



The actively-managed fund would invest most of its assets in short positions on cash-settled bitcoin futures contracts traded on exchanges registered with the Commodity Futures Trading Commission (CFTC).



It seeks to remain fully invested in contracts offering inverse exposure to the Bitcoin Reference Rate “without regard to market conditions, trends, direction or the financial condition of a particular issuer,” the filing notes. The fund does not take temporary defensive positions.



Similarly, Direxion <a href="https://www.sec.gov/Archives/edgar/data/1424958/000119312522098855/d308614d485apos.htm" target="_blank" rel="noreferrer noopener">filed to launch</a> a Bitcoin Strategy Bear ETF on Thursday that would offer managed short exposure to CME bitcoin futures contracts.



The fund manager <a href="https://cms.blockworks.co/proposed-direxion-etf-would-offer-short-exposure-to-bitcoin-futures/" target="_blank" rel="noreferrer noopener">originally</a> filed to launch this ETF in October but <a href="https://cms.blockworks.co/sec-asks-direxion-to-withdraw-bitcoin-etf-application/" target="_blank" rel="noreferrer noopener">withdrew the proposal</a> about a week later upon the request of the Securities and Exchange Commission.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Direxion files Short Bitcoin ETF using an existing filing, jumping ahead of AXS and Proshares! Direxion Bitcoin Strategy Bear ETF goes effective Jun 6 vs AXS and ProShares Short BTC ETFs&#39; Jun 20 *Direxion already had a Short <a href="https://twitter.com/hashtag/BTC?src=hash&amp;ref_src=twsrc%5Etfw">#BTC</a> ETF filed since Oct&#8230;?<a href="https://t.co/NlprelgCt2">https://t.co/NlprelgCt2</a> <a href="https://t.co/dPWFf59PdQ">pic.twitter.com/dPWFf59PdQ</a>&mdash; ETF Hearsay by Henry Jim (@EtfHearsay) <a href="https://twitter.com/EtfHearsay/status/1512183882996670464?ref_src=twsrc%5Etfw">April 7, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



In addition to investing in swaps or futures contracts, the Direxion ETF may also short bitcoin futures ETFs. ProShares, Valkyrie Investments, VanEck and Global X launched such ETFs last year.



“The fund will generally maintain its short exposure to bitcoin futures during periods in which the value of bitcoin is flat or declining as well as during periods in which the value of bitcoin is rising,” the disclosure states.



None of the three funds would invest directly in bitcoin. The filings did not indicate expense ratios for any of the proposed products.



While AXS Investments has just two ETFs trading in the US with about $65 million in assets, according to ETF.com, Direxion has 82 ETFs that manage roughly $27.5 billion.



Spokespeople for Direxion and AXS Investments did not immediately return requests for comment.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.