ProShares Launches 2x Leveraged and Short Spot Bitcoin ETFs

How BITU and SBIT ETFs work

This means if the Bloomberg Bitcoin Index rises by 1% on a given day, BITU is designed to produce a 2% gain, while SBIT would aim for a 2% loss. Conversely, if the index falls by 1%, BITU would seek to deliver a 2% loss, and SBIT a 2% gain.

This mechanism of inverse exposure in SBIT (and leveraged exposure in BITU) is primarily achieved through the use of financial instruments called swaps, with Nomura acting as the counterparty. The underlying asset for these swaps is the iShares Bitcoin Trust (

Swaps were likely chosen over other derivatives or cash margin due to their flexibility and efficiency in achieving the desired leveraged or inverse outcomes without the need for the ETF to hold large amounts of cash or physically own the asset.

However, investors should note the cost associated with these innovative strategies. Both BITU and SBIT carry an expense ratio of 0.95%, which aligns with ProShares' existing lineup of leveraged ETFs.

Risks of BITU & SBIT ETFs

As with any leveraged ETFs, it's crucial to understand that the target leverage of BITU and SBIT is designed to be accurate on a daily basis only.

This means that over periods longer than a day, returns and losses can compound in unpredictable ways, especially when combined with the high volatility inherent to Bitcoin and the leverage targets of these ETFs.

Bitcoin's volatility is notable, with an annualized standard deviation of 77.65% from 2014 to the present. This inherent volatility increases the risk of sharp losses in leveraged products.

For example, a 50% intra-day drop in Bitcoin's price could potentially lead to the liquidation of BITU, while a similar surge could have the same effect on SBIT.

However, it's worth noting that while Bitcoin experienced a maximum drawdown of -73.81% from January 2018 to January 2019, this decline occurred over several months.

The daily reset mechanism of a hypothetical leveraged Bitcoin ETF at the time would have theoretically prevented a total wipeout due to this gradual decline, but investors would likely have still faced significant losses, possibly necessitating a reverse split to adjust the share price.

Use cases for BITU and SBIT ETFs

I believe the most prudent use of BITU and SBIT lies in their application as day or swing trading tools. These ETFs provide a unique opportunity for traders to engage with Bitcoin's price movements through the liquidity and convenience of a traditional stock trading account.

Before the introduction of leveraged Bitcoin ETFs, those looking to make leveraged plays on Bitcoin typically had to navigate futures markets or use margin on cryptocurrency exchanges.

One of the significant advantages of using a leveraged Bitcoin ETF is the elimination of the risk of a margin call. Your maximum loss is capped at the total investment in the shares purchased, making it simpler to manage risk.

Finally, position sizing becomes straightforward as well—traders can simply buy the number of shares they are comfortable with, aligning with their risk tolerance and trading strategy.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.