Bitcoin's surge stimulates risk appetite! Leveraged ETFs attract a massive influx of funds.

Zhitong
2024.03.13 00:43
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Bitcoin hit a new all-time high, driving an increased demand for leveraged investment tools. The inflow of funds into leveraged Bitcoin Exchange-Traded Funds (ETFs) based on futures has now become comparable to spot Bitcoin ETFs. Among them, the inflow of funds into VolatilityShares' 2x Bitcoin Strategy ETF is second only to BlackRock and Fidelity Investments' spot Bitcoin ETF. Leveraged Bitcoin ETFs account for nearly 25% of the open interest on the Chicago Mercantile Exchange. The growing demand from investors for leveraged long positions has led to a significant influx of funds into leveraged ETFs. U.S. financial institutions tend to use regulated products, while overseas entities are turning to derivative trading and other channels. Investors are leveraging their bets through various channels in the latest bull market.

Zhitong App has learned that as Bitcoin hits a new all-time high, the demand for investment tools providing leverage is skyrocketing. It is reported that the inflow of funds into leveraged futures-based Exchange-Traded Funds (ETFs) is now comparable to that of spot Bitcoin ETFs, such as VolatilityShares' 2x Bitcoin Strategy ETF (BITX), with a monthly net inflow of $630 million, second only to spot Bitcoin ETFs from BlackRock and Fidelity Investments.

The futures-based Bitcoin ETF currently holds a historical high equivalent exposure of 83,300 Bitcoins, with leveraged Bitcoin ETFs accounting for nearly 25% of the open interest contracts on the Chicago Mercantile Exchange (CME), one of the largest cryptocurrency derivative markets. K33 Research indicates that with the open interest contracts hitting a record high, the futures premium on the platform has surged to 20%.

A report from K33 Research on Tuesday stated, "The significant increase in inflows into the 2x Bitcoin Strategy ETF indicates a huge demand for leveraged long positions in Bitcoin recently, consistent with the rising risk appetite for Bitcoin derivatives." "The substantial inflow into this ETF is a major catalyst for the surge in CME open interest contracts."

K33 Research data shows that VolatilityShares' 2x Bitcoin Strategy ETF currently holds 36,025 Bitcoins, with the cryptocurrency it manages more than doubling in the first 11 days of March.

Investor's growing interest in such ETFs has led to a series of new products. ProShares is expected to launch five leveraged long and short Bitcoin ETFs next month to meet the new market demand, while Valkyrie recently introduced a 2x leverage product.

Currently, investors are pouring into the crypto market in large numbers, seeking to leverage bets in the latest bull market through various channels. U.S. financial institutions tend to use regulated products such as CME cryptocurrency futures and spot ETFs from traditional asset management companies. Overseas entities are turning to options contracts on derivative exchanges and Binance's perpetual futures with no expiration date, one of the most popular products among cryptocurrency investors.

The Bitcoin perpetual futures funding rate (a key indicator of cryptocurrency leverage) on major offshore exchanges remains high, with record open interest on leading cryptocurrency options trading platform Deribit and a surge in bullish Bitcoin bets. The report from K33 Research states, "This may continue to highlight a significant risk appetite in the market, with high funding rates and volatile price swings in open interest contracts."

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