A week after its launch, ProShares wants to change the way it operates its new Bitcoin futures ETF.
ProShares has requested an exemption from CME for Position Limits
ProShares CEO Michael Sapir told Barron’s that his company has requested an exemption from Chicago Mercantile Exchange trading restrictions for its Bitcoin ETF. The company will seek permission to invest in other types of derivatives contracts. The CME limits the number of Bitcoin futures contracts that expire in the same month to 2,000, and ProShares can only hold 4,000 contracts for November and 5,000 contracts total. ProShares holds 2,133 contracts for November and 1,679 contracts for October, which is 76% of the limit.
CEO Michael Sapir told Barron’s that if the CME does not grant the exemption, ProShares could shift its assets into later-maturity contracts, structured notes, or swaps. Barron’s also pointed out that ProShares’ prospectus for the ETF states that the fund could also invest in equities with crypto exposure.
The Bitcoin ETF has grown to over $1 billion assets under management
After the launch, the ETF has grown to more than $1 billion in assets under management. The ETF invests 25% of investor money in a Cayman Islands subsidiary and then directs that subsidiary to buy Bitcoin futures on the Chicago Mercantile Exchange. Currently, ProShares invests the remaining 75% in treasury securities and the repo market. ProShares also borrows money from the repo market to provide leverage to its investments. With this leveraged money, ProShares invests in futures contracts – cash-settled bets on the future price of Bitcoin.
The fund does this regardless of market conditions. When the price of bitcoin rises, ProShares profits from those bets. With these profits, ProShares would borrow and lend money in the money market to buy Bitcoin futures. If Bitcoin falls, ProShares loses the cash-settled bets and its cash holdings and Bitcoin exposure shrink.