Cryptocurrencies are a divisive asset class – they seem to have as many fans as haters. Not sure which way the crypto winds may blow? There’s a new way to hedge your bets.
Ether bears who want to conveniently short the world’s second-largest cryptocurrency now have a new exchange-traded fund (ETF) that does just that. Enter the ProShares Short Ether Strategy ETF, which is listed on the New York Stock Exchange, Arca, on Thursday, November 2, under the memorable ticker “SETH.”
The fund enables investors to profit from ether price slumps through an inverse (-1x) of the daily performance of the S&P CME Ether Futures Index. It claims to be the first ETF of its kind.
“SETH is designed to address the challenge of acquiring short exposure to ether, which can be onerous and expensive,” said ProShares CEO Michael Sapir. “With today’s launch of SETH, ProShares now offers investors opportunities to profit both on days when ether increases and when it drops — all through the convenience of a traditional brokerage account.”
The issuer already has four crypto-linked ETFs, which offer mixed exposure to Bitcoin (BTC) and Ether, respectively. Among these is the ProShares Bitcoin Strategy ETF (BITO), notable for being the first U.S. bitcoin-linked fund. It also manages the ProShares Short Bitcoin Strategy ETF (BITI), which offers a similar strategy to SETH but shorts BTC.
Ether price action has been bullish in 2023, although with more muted upswings than big brother Bitcoin. Ether is trading currently around $1800, up almost 50 percent year-to-date. Although its growth has moved in fits and starts, pumping and retreating, Ether hasn’t slipped into the red all year, remaining consistently above $1195 – where it was on December 31, 2022.
Enthusiasm is growing among crypto circles about prospects for further institutional adoption of digital assets. Regulators in the U.S. review multiple applications by asset managers like BlackRock, Franklin Templeton, and Fidelity, who are vying to launch a spot Bitcoin ETF.
Wall Street research firm Bernstein forecasts the crypto fund management industry will grow at least tenfold over the next five years, from a roughly $50 billion “cottage industry” today to a regulated sector managing “$500-650 billion of assets.”
However, crypto is not out of the regulatory woods yet. JPMorgan analysts claim that if the U.S. Securities and Exchange Commission (SEC) declines BlackRock’s ETF application, there may be more legal action. The federal regulator has already sparred in the courts with Grayscale Investments over the same issue. Fog still shrouds the path forward.
“While sentiment toward cryptocurrencies has improved in 2023, some investors have skepticism,” says VettaFi’s Head of Research, Todd Rosenbluth. “This new ETF gives them an alternative to staying on the sidelines. ProShares has built a strong lineup of crypto-linked ETFs.”
This unique inverse play doesn’t come cheap. SETH charges an annual expense ratio of 1.33 percent.