Provider of the first Bitcoin ETF in the U.S. seeks relief from trading limits

The ProShares, which launched the Bitcoin futures ETF (BITO), filed with CME to lift restrictions on the maximum number of contracts that may be bought. This was stated by the company’s CEO Michael Sapir in an interview with Barrons.

The executive also said he planned to seek permission for BITO to invest in other types of derivatives — long-dated contracts, swaps or structured notes.

According to BITO prospectus, the management company “after consultations with staff of the SEC” will be able to invest in other products correlated with the price of digital gold. Among the examples cited are Riot Blockchain and MicroStrategy. Purchases of instruments based on other cryptocurrencies are not ruled out.

Interest in the first Bitcoin ETF proved to be so large that its provider had to switch to purchases of long-dated futures. This increases the tracking error.

Bloomberg analyst Eric Balchunas noted the possibility that ProShares could use swaps. Along with the lifting of trading limits the firm could support further growth in AUM.

NOTABLE: Barron’s article confirms what I’ve been hearing too, that ProShares is filing to be exempt from CME position limits AND they can use swaps if need-be. Both would obv be huge help to maintain exposure if $BITO keeps getting bigger. pic.twitter.com/Fwu2Lntotb

— Eric Balchunas (@EricBalchunas) October 23, 2021

CME limits the number of contracts for the nearest expiration to 2,000 (from November the limit will rise to 4,000). The total number of such derivative instruments is capped at 5,000.

As of October 22, BITO held 1,679 October and 2,133 November contracts worth a total of $1.17 billion on the balance sheet. In other words, ProShares had used 76% of the overall limit.

As a reminder, on Nasdaq began trading a Bitcoin futures ETF from Valkyrie Investments. On October 25 the debut of a similar product from VanEck is set.

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