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Investors start betting against Bitcoin with short-trade products

Some crypto-bros keep the faith in the face of market onslaught

ProShares, the issuer of exchange-traded funds with around $65 billion under management, has launched the first short Bitcoin exchange-traded product in the US, offering a way for investors to make money from the ongoing cryptocurrency meltdown.

Dubbed the ProShares Short Bitcoin Strategy, the ETF is set to launch on the New York Stock Exchange under the ticker BITI. Bitcoin declined to $17,601.58 over the weekend, according to Coin Metrics. It has lost 70 percent of its value since last November's highs.

Speaking to the Financial Times, Nate Geraci, president of wealth management firm The ETF Store, said there would be "a rather robust market" for the short funds.

"I have no doubt they'll find an audience, particularly given the current crypto market environment. There is certainly no dearth of Bitcoin permabears out there who strongly believe this thing is going to zero," he added.

Other stock exchanges have their own crypto-short funds. Canada, for example, has Horizon ETFs' BetaPro Inverse Bitcoin ETF (BITI), launched on the Toronto stock exchange in April 2021, which has offered 142 percent returns since November.

Bitcoin is not the only casualty of the so-called crypto winter. Last week, Coinbase axed 1,100 employees, cutting its workforce by 18 percent, while the value of digital assets including Bitcoin plummet amid rising inflation rates in the US. Some estimates suggest the combined market capitalization of cryptocurrencies has fallen by around $2 trillion in recent months.

But doom-mongers and short traders have not put off die-hard crypto fans, including Tesla CEO Elon Musk. The electric car company supremo said on Twitter he is still buying Dogecoin and would continue to support it.

Despite being launched as something of a joke, Dogecoin has attracted real investors and reached a market capitalization of over $85 billion on May 5, 2021.

Other crypto bros keeping the faith include MicroStrategy CEO Michael Saylor. Over the last two years the company, which ostensibly makes enterprise software, has invested $3.97 billion in around 130,000 Bitcoin. For example, last year a US Securities and Exchange Commission filing showed the company bought $10m in the cryptocurrency at an average price of $43,663, more than twice the current value. It is said to have lost $1 billion on its total Bitcoin investment so far.

Concern has been mounting that conditions for MicroStrategy loans might force it to dump Bitcoin in an already falling market. In May, it explained that if the price of the Bitcoin fell to around $21,000 a call would be triggered on its $205 million loans from a unit of Silvergate Bank.

But Saylor told Bloomberg the loan "remains collateralized with an loan-to-value ratio of less than 50 percent: there is no margin call."

Sayer has also taken to Twitter to vigorously defend the currency and his strategy. "If you don't stand for something, you will fall for anything," he said. ®

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