New ETF Proposal Targets Bitcoin Gains Made During Off-Market Hours

TLDR

• Tidal Trust has filed a proposal for a Bitcoin ETF that will focus on after-market trading hours.
• The ETF will purchase Bitcoin at market close and sell it at market open, capturing overnight price movements.
• During daytime hours, the ETF will allocate assets to US Treasuries, money market funds, and cash equivalents.
• Analyst Eric Balchunas noted that most of Bitcoin’s gains occur after market hours.
• Bitcoin ETFs have faced record outflows in recent months, with $4 billion withdrawn in November

Tidal Trust has proposed a new exchange-traded fund (ETF) that will focus on Bitcoin trading during off-market hours. The company filed a Form N-1A registration statement with the US Securities and Exchange Commission (SEC) on Tuesday. This move is aimed at capturing Bitcoin’s price movement after US market hours.

Bitcoin’s After-Hours Trading Strategy

The proposed ETF will track Bitcoin’s price movements from the end of US market trading hours to the opening of the market the following day. According to the SEC filing, the fund will buy Bitcoin at market close and sell it at market open. This strategy would enable the fund to hold Bitcoin through the day while avoiding volatile daytime price movements.

Tidal Trust has emphasized that the new fund will use Bitcoin futures and underlying Bitcoin funds. It will trade Bitcoin futures during US overnight hours and close positions soon after the market opens. In the case of Bitcoin Underlying Funds, the ETF will purchase a security at market close and sell it at the open, capturing price changes that happen after hours.

This investment approach aims to avoid the price volatility Bitcoin experiences during active trading hours. The ETF will allocate its assets to US Treasuries, money market funds, and other cash equivalents during the day. This ensures the fund avoids exposure to Bitcoin’s unpredictable price swings during US market hours.

Analyst Response to the Proposal

Eric Balchunas, an ETF analyst, pointed out that many of Bitcoin’s gains occur after hours. He stated, “We looked at this last year and found most of the gains are in fact after hours.” Balchunas added that the ETF might outperform others due to its strategy of focusing on after-hours price movements.

The filing for the new ETF does not guarantee that the SEC will approve the product. However, the SEC has already approved various crypto-related investment vehicles, such as Bitcoin and Ether futures ETFs. It has also cleared spot digital asset ETFs and staked crypto ETFs in the past.

Bitcoin ETF Outflows Continue to Grow

Bitcoin ETFs have faced challenges recently. In November, spot Bitcoin ETFs listed on US exchanges experienced record outflows. About $4 billion was withdrawn, with BlackRock’s iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund leading the redemptions.

Despite the outflows, the new ETF proposal may still attract interest due to its focus on after-market trading hours.

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