Hong Kong-based fund provider CSOP Asset Management has listed on the Hong Kong Exchange (HKEx) Asia’s first bitcoin futures inverse product, the CSOP Bitcoin Futures Daily (-1x) Inverse Product, which aims to provide investment results that, before fees and expenses, closely correspond to the one-time inverse daily performance of the S&P Bitcoin Futures Index.

The product, 7376.HK, adopts a futures-based replication strategy to achieve the investment objectives, investing directly in the spot month CME (Chicago Mercantile Exchange) Bitcoin Futures following a rolling strategy. With a listing price of about HK$7.8 per unit, trading lot of 100, and management fee of 1.99%, the product has received an initial investment of around US$30 million.

Bitcoin has been the most erratic among major global assets in the last 10 years, according to Bloomberg data, with volatility as high as 38.3% in 2023, surpassing crude oil and the Nasdaq-100. With no intrinsic value, its price is highly volatile and speculative, influenced by market demand and supply, as well as market news and rumours.

During the rally in Q1 2024, global futures-based bitcoin inverse products, Bloomberg data finds, had the highest quarterly inflow of US$79 million since Q2 2023. As of end of June 2024, Bitcoin CME Futures saw a record high in net short interest among leveraged funds, at about US$5.7 billion, likely due, Bloomberg notes, to a growing popularity of basis trade.

When market reels, bitcoin drawdown could be even more prominent, CSOP points out, suggesting more chances for short trades. The bitcoin price might also be affected by uncertainties amid the US presidential election, supply overhang and the US Federal Reserve’s monetary policy.

The S&P index tracks the performance of the nearest maturing monthly bitcoin futures contracts trading on the CME. The index is a price weighted, excess return (and not a total return) index and, therefore, reflects the CME Bitcoin Futures price movements only (and not any notional interest earnings) in US dollars. Instead of directly participating in the bitcoin futures market to short bitcoin, the product offers an easy and efficient way to capture investment opportunities brought by the decline in the price of bitcoin futures.

The asset manager successfully launched Asia’s first bitcoin futures exchange-traded fund (ETF), CSOP Bitcoin Futures ETF, in December 2022.

“As an ETF issuer esteemed by investors in the Asia-Pacific region, CSOP has always aimed to offer comprehensive and diversified investment products,” says Ding Chen, the asset manager’s CEO. “The first futures-based inverse bitcoin product listed in Hong Kong creates opportunities for investors to gain from downside movements in bitcoin.”