A novel exchange-traded fund (ETF) proposal has been filed with the U.S. Securities and Exchange Commission (SEC), aiming to capitalize on Bitcoin's price movements during off-market hours. Tidal Trust II, in partnership with Nicholas Wealth Management, submitted the filing for the "Nicholas Bitcoin and Treasuries AfterDark ETF". This unique ETF is designed to purchase Bitcoin (BTC) at the start of U.S. market trading hours and sell it at closing, effectively holding the cryptocurrency overnight.
The strategy behind the "Bitcoin After Dark" ETF is based on the observation that a significant portion of Bitcoin's price gains occur when traditional U.S. markets are closed. By focusing exclusively on overnight trading, the ETF seeks to capture this "overnight alpha," potentially delivering enhanced returns compared to traditional Bitcoin ETFs.
According to the filing, the ETF will utilize various instruments to achieve its investment objective, including U.S.-listed Bitcoin futures, Bitcoin ETPs, and options. During daytime hours, when the ETF is not holding Bitcoin, it will allocate its assets to U.S. Treasuries, money market funds, and other cash equivalents. This approach aims to provide investors with indirect exposure to Bitcoin while mitigating some of the cryptocurrency's inherent price volatility.
Bloomberg Senior ETF Analyst Eric Balchunas noted that historical data indicates stronger Bitcoin returns during after-hours trading. He suggested that the "Bitcoin After Dark" ETF could potentially yield better returns, though he cautioned that it remains to be seen.
The SEC has previously approved various crypto-tied investment vehicles, including Bitcoin and Ether (ETH) futures ETFs, spot digital asset ETFs, and staked crypto ETFs. However, the agency's stance on cryptocurrency investments has been cautious, and the approval of the "Bitcoin After Dark" ETF is not guaranteed. The filing may undergo changes as the SEC reviews the proposal.
The potential impact of this innovative ETF is noteworthy considering the recent trends in the Bitcoin ETF market. In November, spot Bitcoin ETFs listed on U.S. exchanges experienced record outflows, with approximately $4 billion withdrawn. BlackRock's iShares Bitcoin Trust and Fidelity's Wise Origin Bitcoin Fund were among those leading the redemptions. Despite these outflows, BlackRock CEO Larry Fink recently stated that multiple sovereign wealth funds are quietly accumulating BTC. BlackRock's iShares Bitcoin Trust (IBIT) has also become the largest crypto ETF globally.
The "Bitcoin After Dark" ETF represents a creative approach to capturing value in the Bitcoin market. By focusing on overnight trading and utilizing a combination of Bitcoin-related instruments and traditional assets, the ETF seeks to provide investors with a unique and potentially more profitable way to gain exposure to the world's leading cryptocurrency.
