BITO Sees Biggest Institutional Inflow in One Year amidst Bitcoin ETF Craze.

Amid the current hype surrounding Bitcoin (BTC) exchange-traded funds (ETFs), with several new applications this month, institutional investments in these derivative products have once again surged. Bloomberg’s senior ETF analyst, Eric Balchunas, recently pointed out that there is a strong influx of institutional funds into the ProShares Bitcoin Strategy ETF (BITO) โ€“ a Bitcoin futures fund.

Last week, the fund recorded its largest weekly inflow in a year, at $65.3 million, with assets totaling over $1 billion.

ProShares’ BITO is one of the most popular funds among institutional investors in the US and was the first BTC-linked ETF to launch in the US. Balchunas said that BITO has been tracking the Bitcoin price very accurately, lagging the spot prices by only 1.05% annually and has a fee of 0.95%. He said:

“The Bitcoin Futures ETF $BITO had its biggest weekly inflow in a year as assets top $1b again. It also traded half a billion in shares on Friday, which itโ€™s only done about 5 times before. Interesting thing re $BITO, even though it got trashed by some bc futures roll costs yada yada, it pretty much has tracked bitcoin perfectly. Itโ€™s lagged spot by 1.05% ann, but its fee is 0.95% = only 10bps of roll (extra) costs, which is rounding error. Many predicted >5% a yr.”

ProShares’ BITO Performance in 2023

Since the beginning of 2023, ProShares’ BITO fund has recorded a gain of 59.6%, which is very much in line with the gains in the BTC price in 2023. Ever since financial behemoth BlackRock filed for its own Bitcoin ETF on June 15th, there has been a strong uptick in interest in Bitcoin derivative products.

Bitcoin futures open interest (OI) on the Deribit crypto options exchange has experienced a significant increase in recent days. As of June 25th, the OI stands at $319 million, marking an increase of approximately 30% compared to the previous week.

Open interest (OI) refers to the total number of futures contracts that are still active and have not yet been settled. It serves as a measure of overall market activity and involvement in Bitcoin futures trading.

The increase in ETF trading and the rise in Bitcoin’s price has been positive for Grayscale, the largest crypto asset manager globally. The Grayscale Bitcoin Trust (GBTC), which had been trading at a significant discount compared to the actual Bitcoin price, is now moving in the right direction as the gap between the two narrows.

According to Coinglass data, the premium or discount of Grayscale, which indicates the difference between its price and the actual Bitcoin price, currently stands at -31.2%. This discount reached as low as -49% back in December 2022.