Hong Kong is set to make a significant stride in the Bitcoin market by launching Asia’s first inverse Bitcoin exchange-traded fund (ETF).
This new financial product, named the CSOP Bitcoin Futures Daily (-1x) Inverse Product, allows investors to bet against bitcoin, offering a novel way to navigate the volatile digital asset market.
The inverse Bitcoin ETF is managed by CSOP Asset Management, one of China’s largest asset managers, and is set to debut today on the Hong Kong Stock Exchange (HKEX).
The CSOP Bitcoin Futures Daily (-1x) Inverse Product is designed to provide investment results that closely correspond to the inverse daily performance of the S&P Bitcoin Futures Index.
Essentially, when bitcoin’s price drops, the value of this inverse ETF goes up. This innovative product is tailored for investors looking to profit from or hedge against declines in bitcoin’s price without directly shorting the asset.
Ding Chen, CEO of CSOP Asset Management, expressed excitement about the launch, stating:
“As an ETF issuer esteemed by investors in the APAC region, CSOP has always aimed to offer comprehensive and diversified investment products. We are currently the leading provider of Leveraged and Inverse products in Hong Kong, with a market share of 99%.”
She emphasized that collecting between $50 million and $100 million in assets for the inverse Bitcoin ETF over a couple of years is “definitely achievable.” The firm will charge a management fee of 1.99%.
The launch of this inverse ETF comes at a time of significant volatility for bitcoin. The digital asset has seen dramatic price fluctuations influenced by political developments in the United States.
Bitcoin dropped below $54,000 in early July before rebounding to $67,234, driven by optimism around pro-Bitcoin political developments, including the potential return of Donald Trump to office.
Chen highlighted that some traders believe Trump-driven optimism might push bitcoin’s price to $100,000 “very soon.”
However, she also pointed out the need for risk management tools for investors in such a volatile market, stating that the inverse ETF provides a crucial alternative for managing risk or adopting different strategies.
The CSOP Bitcoin Futures Daily (-1x) Inverse Product will invest directly in spot-month Chicago Mercantile Exchange (CME) Bitcoin Futures, following a rolling strategy to achieve its investment objectives.
This approach allows the ETF to mirror the inverse performance of the S&P Bitcoin Futures Index closely.
Tristan Frizza, Founder of Zeta Markets, noted that the launch of this inverse Bitcoin ETF highlights the “increasing sophistication of crypto financial products” globally. He explained:
“By enabling bets against the market, financial instruments like this have the potential to balance speculative activities and contribute to long-term market stability, which is crucial for the maturation of the crypto sector and the acceptance of crypto as established investment assets.”
For Hong Kong, the introduction of the inverse Bitcoin ETF is a significant step in its ongoing efforts to establish itself as a leading Bitcoin-friendly hub, rivaling cities like Singapore and Dubai.
This move builds on previous successes, such as the launch of the CSOP Bitcoin Futures ETF (3066.HK) in December 2022, which was the region’s first Bitcoin futures ETF. The new inverse product is expected to attract demand from investors in Japan, Korea, and Singapore.
Hong Kong’s Bitcoin ambitions are further underscored by the city’s strategy to cultivate a favorable environment for digital asset investments.
Related: Bitcoin Adoption in Hong Kong | A Financial Revolution
Authorities have licensed two exchanges to facilitate retail trading on a limited basis. Additionally, the city offers an in-kind subscription and redemption mechanism for ETF units, allowing underlying digital assets to be swapped for ETF units and vice versa.
The market response to the launch of Hong Kong’s first inverse Bitcoin ETF is anticipated to be positive, given the increasing demand for sophisticated investment tools amid ongoing market volatility.
Global interest in inverse digital-asset exchange-traded products has been growing, with over $106 million invested in such products to date. The largest of these funds, the Short Bitcoin Strategy ETF from ProShares Advisors LLC, has accumulated $62.5 million in assets.
CSOP’s new inverse Bitcoin ETF aims to replicate this success in the Asia-Pacific region. The firm has set an ambitious target of attracting $50 million to $100 million in assets under management within the next couple of years.
This goal appears attainable given the current market conditions and the growing interest in hedging tools among investors.
The CSOP Bitcoin Futures Daily (-1x) Inverse Product will have a listing price of approximately HKD 7.8 per unit, with a trading lot of 100.
The ETF’s strategy allows it to achieve the desired inverse performance relative to the S&P Bitcoin Futures Index, which tracks the performance of the nearest maturing monthly Bitcoin Futures contracts trading on CME.
Bitcoin has been one of the most volatile major global assets in recent years. In 2023, its volatility reached as high as 38.3%, surpassing even crude oil and the Nasdaq-100.
This high volatility makes bitcoin an attractive target for inverse investment products, which can capitalize on price declines.
The launch of this product is not just a milestone for Hong Kong but also for the broader Bitcoin market.
It represents a growing acceptance and integration of bitcoin-related financial products in mainstream markets. This development is crucial for the maturation of the sector and its acceptance as a legitimate asset class.
