ProShares Unveils First-Ever Inverse ETF for Ethereum, Allowing Investors to Hedge Their Bets

By 0xGorki 11/2/23 2:37 PM

ProShares, a prominent player in the world of exchange-traded funds (ETFs), is making waves in the cryptocurrency market by introducing the first-ever ETF designed to allow investors to take a bearish view on Ethereum (ETH), the world’s second-largest cryptocurrency. ProShares’ latest offering, the ProShares Short Ether Strategy ETF, aims to provide a unique investment vehicle for those who believe in a potential downturn in the price of ETH.

The ProShares Short Ether Strategy ETF is designed to track the inverse daily performance of the Standard & Poor’s CME Ether Futures Index. In simpler terms, if the index falls by 1%, this ETF will seek to return 1%, effectively allowing investors to profit from a decline in the value of Ethereum. It’s important to note that, like other cryptocurrency-related ETFs, this product is linked to futures contracts on ether, rather than the actual spot price of the cryptocurrency. The launch of this innovative ETF is a significant development in the cryptocurrency investment landscape.

The move to offer an inverse ETF for Ethereum comes after the debut of the first-ever Ethereum ETFs in early October. ProShares, being at the forefront of this emerging trend, launched three out of the nine new Ethereum-focused ETFs. The ProShares Ether Strategy ETF provides investors with exposure exclusively to Ethereum, while the other two combine exposure to both Ethereum and Bitcoin.

Interestingly, the initial performance of these Ethereum-focused ETFs was somewhat underwhelming, especially when compared to the success of the ProShares Bitcoin Strategy ETF. The Bitcoin ETF managed to attract approximately $1 billion in assets within the first few days of trading. In contrast, the largest of the new Ethereum futures ETFs currently holds less than $10 million in assets.

Michael Sapir, the CEO of ProShares, emphasized the significance of the ProShares Short Ether Strategy ETF by stating that it is designed “to address the challenge of acquiring short exposure to ether, which can be onerous and expensive.” In traditional financial markets, taking a short position involves borrowing an asset and selling it with the hope of buying it back at a lower price in the future. The complexities and costs associated with shorting Ethereum have been a barrier for many investors looking to profit from potential price declines.

ProShares has previously introduced an inverse Bitcoin ETF, known as the ProShares Short Bitcoin Strategy ETF, which has gathered around $74 million in assets. This move to offer inverse ETFs for both Bitcoin and Ethereum demonstrates the company’s commitment to providing a diverse range of investment options within the cryptocurrency space.

It’s worth noting that while the market has seen significant interest in cryptocurrency ETFs, the U.S. Securities and Exchange Commission (SEC) has yet to approve spot Bitcoin ETFs. Spot ETFs would offer exposure to the actual price of Bitcoin rather than the futures market. The regulatory landscape for cryptocurrency ETFs remains a topic of keen interest among investors and market observers.

In conclusion, the introduction of the ProShares Short Ether Strategy ETF is a milestone for the cryptocurrency investment space, offering investors a unique opportunity to take a bearish view on Ethereum. As the cryptocurrency market continues to evolve and mature, the availability of such products is likely to reshape the way investors approach digital assets, providing new avenues for both speculative and risk-management strategies. However, the SEC’s stance on cryptocurrency ETFs and their potential impact on the market will remain a subject of great interest and scrutiny in the coming months.

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