Thanks for Nothing

  1. Futures trade at a premium or discount relative to the cash or spot value. In bitcoin, the futures usually trade in contango because bitcoin can pump to infinity, but can only dump to zero. Also, very important — unlike a commodity, the supply of bitcoin is fixed, irrespective of the price. For example, as the price of gold rises, certain deposits become economical to mine and supply increases, which dampens prices. Even if bitcoin instantly rose to trade at $100,000, there would only be so many bitcoin mined each block — which almost necessitates a futures curve in contango.
  2. The fund must roll futures contracts every month. The roll costs money, as the fund manager must cross a spread. That cost is passed on to holders of the ETF.
  1. You begin long October contracts, BTCV1.
  2. You execute a transaction whereby you sell BTCV1 and purchase BTCX1. This is called long rolling.
  3. Because BTCX1 Price > BTCV1 Price, there is a trading loss that holders of the fund absorb.
  1. An authorised participant (AP) submits an amount of USD cash to the fund to create a certain number of ETF units.
  2. The fund takes that cash, and then purchases futures contracts and transfers units to the AP.
  3. I am not sure how that execution is done. Sometimes the AP can specify to the fund how they would like the execution to happen. For example, if the AP wanted to match the close (4:00pm), the fund would pay a broker to match the 4:00pm futures print for a fee. Or, the fund could have complete discretion as to how the futures are purchased. It is unclear from the prospectus how executions will happen.
  4. One way to ascertain the method of execution is to find a day when the number of shares outstanding increased, and then review the CME executions for the front-month contract for any obvious abnormalities that would point to a specific type of execution.
  1. An AP submits an amount of ETF units to the fund, to redeem and receive USD cash.
  2. The fund takes the ETF units and then long sells futures positions, which frees up margin. That cash is then transferred to the AP.
  3. Similar to creations, it is unclear how the sell orders will be executed.



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Arthur Hayes

Arthur Hayes


Co-Founder of 100x. Trading and crypto enthusiast. Focused on helping spread financial literacy and educate investors.