Cryptocurrencies are crumbling and the rout has sent investors in a bitcoin fund that had a stellar debut not long ago, looking for cover. The ProShares Bitcoin Strategy ETF (BITO) has shed over 35 percent in less than three months since its launch in October last year.

The fund was, in fact, among the 10 worst performers in terms of returns over two months since its public listing, Bloomberg Intelligence data analysed by Athanasios Psarofagis showed at the end of last week.

Worries over the rapid spread of the Omicron variant of COVID-19, higher inflation, and expectations of multiple interest rate hikes in the US this year have weighed down the crypto market. Bitcoin has lost over 40 percent from its all-time high of $69,000 scaled in November 2021 and it is down 10.5 percent since the start of 2022.

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ProShares Bitcoin ETF had garnered a record amount of $1 billion, within two days of launch making it among the most successful debuts ever. It bagged the second spot on the turnover charts, just behind a fund with pre-seed investment backing. But the doom began as quickly. The fund has not attracted a single penny in investments so far this year.

The fund does not invest directly in bitcoin but is based on futures contracts. Due to regulatory concerns, direct holding of bitcoin by an ETF is not yet allowed.

Since the establishment of the ProShares Bitcoin Strategy ETF, eight out of the top 10 cryptocurrencies by market cap have tanked. Two have remained consistent only because they are stable coins pegged to the US dollar (Tether & USD Coin).

The volume of Bitcoin being traded has also plummeted in the last year. A Messari compilation of Kaiko data showed the average value of traded Bitcoin was currently at $4.8 billion across exchanges against the previous year’s daily traded average of $9.2 billion. Moreover, during the all-crypto massacre, investors liquidated $2.4 billion in cryptocurrencies, according to Coinglass.com.

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Bitcoin futures open interest, which stood at $17.4 billion in October 2021, has now shrunk to $10.6 billion, a 39 percent drop, per data from the Chicago Mercantile Exchange.

Despite the record pumping in of $1 billion in funds within two days of its launch, the assets under management of the ProShares Bitcoin Strategy ETF are still languishing at around $1.2 billion.

The Fear and Greed Index of bitcoin indicates the worse may not be over yet for the crypto market. The index which shuttles between 0 (Extreme Fear) and 100 (Extreme Greed), has fallen lower to 15 – signalling extreme fear among crypto investors.

The political distress in Kazakhstan over the last week has only added to the disruption, shaking the bitcoin market. The bulk of crypto mining activities had shifted to Kazakhstan after China’s ban on crypto mining in the country.

Despite all the developments and underlying causes that have led to the underperformance of the ProShares Bitcoin Strategy ETF, Psarofagis believes its performance won’t necessarily have repercussions on the future industry growth. “You can see some other ETFs had a rough start out of the gate but can still raise assets,” Bloomberg’s Psarofagis said, referring to the list of the ten worst performers.

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(Edited by : Yashi Gupta)