Bitcoin ETF Futures Construction: An Examination of Their Organizational Framework
In a groundbreaking move, the Moscow Exchange launched a cash-settled, non-deliverable futures contract on the iShares Bitcoin Trust ETF (IBIT) on June 4, 2023. This new instrument offers Russian investors a regulated way to speculate on Bitcoin price movements indirectly without owning the cryptocurrency or the ETF itself.
The futures contract, which is linked to the ETF’s US-listed price, functions as a derivative of a derivative, as some analysts have described it. It does not involve physical delivery of Bitcoin or ETF shares. Instead, at contract maturity, positions are settled in Russian rubles based on the difference between the contract price and the actual market price of the IBIT.
Since its launch, trading activity has been modest, with just ₽1.25 billion in open positions by late June 2023. Individuals mostly take long positions, betting on Bitcoin price increases via the ETF, while legal entities tend to short the ETF futures.
The futures price reflects the value of IBIT shares, which have risen 11.7% since the futures’ launch, mirroring Bitcoin’s market growth. Some analysts view these futures as a proxy for Bitcoin price forecasts, with some expecting prices to reach $120,000 in July 2023.
The new instrument coexists with more popular derivatives like foreign currency futures and futures on precious metals or Russian stock indices. However, less than 1% of Russian investors currently use futures, highlighting the niche role of these crypto-linked contracts.
The Bitcoin ETF futures contract has attracted significant interest from professional investors, particularly large and institutional ones, who see it as a tool to bet on the cryptomarket. Alexander Krayko, the head analyst at Cifra Markets, predicts high interest from professional investors in the futures contract.
The launch of the IShares Bitcoin Trust ETF in January 2024 has also attracted mass investors to cryptocurrency. In addition, several brokers in Russia have launched instruments linked to cryptocurrencies, such as "T-Investments" offering digital financial assets for 0.001 Bitcoin.
It's worth noting that achieving the same level of protection as on the Moscow Exchange is impossible with direct Bitcoin investments. To mitigate risks of blocking or hacker attacks, the non-deliverable futures contract on the crypto ETF is protected.
Moreover, "Alfa-Capital" and Rumberg Capital have offered clients structured bonds on IShares Bitcoin ETF. The Bitcoin token itself has also appreciated by more than two times, from $39,000 to $102,000, further fuelling interest in the cryptomarket.
In conclusion, the Bitcoin ETF futures contract offers a unique opportunity for large, cautious investors who are just considering cryptocurrency. While its popularity is still growing, it provides a regulated and secure way for Russian investors to participate in the cryptomarket without directly owning Bitcoin or the ETF itself.
The Bitcoin ETF futures contract provides a secured method for Russian investors, particularly institutions, to speculate on the growth of Bitcoin prices, as it does not involve owning the cryptocurrency or the ETF. Despite its niche role, the new futures contract coexists with other derivatives like foreign currency futures and precious metals or Russian stock indices, and has attracted significant interest from professional investors.
