Want to Bet Against Bitcoin? Now You Can

Bitcoin could decline suddenly. Bet against it with the newly listed Horizons BetaPro Inverse Bitcoin ETF (TSX:BITI).

| More on:
sad concerned deep in thought

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Bitcoin’s meteoric rise tends to attract speculators and skeptics in equal measure. The world’s most popular cryptocurrency is vulnerable to volatility. Previous boom/bust cycles have been noteworthy. As we live through another boom, another bust cannot be ruled out. 

However, this time, investors on the sidelines can actually bet against Bitcoin. Here’s what you need to know about the new “inverse ETF” that lets you bet on a plunge in Bitcoin’s value and why adding it to your portfolio could be a good idea. 

Bitcoin cycles

Bitcoin’s path to a US$1 trillion valuation has been an absolute rollercoaster. When it was first created back in 2009, you could purchase thousands of BTC for a single dollar. Since then, the cryptocurrency has been prone to several boom/bust cycles. 

By 2011, the value of each token had crossed US$1 and some major platforms like Wikileaks had started accepting BTC payments. In 2013 alone, the value of each coin swung from US$266 down to US$37 in a matter of months when cryptocurrency exchange Mt.Gox collapsed. 

The biggest boom/bust cycle played out between 2016 and 2019, when the value of Bitcoin surged from US$450 up to US$19,000 and back down to US$3,000. 

In short, BTC investors should expect volatility. Now that each token trades above $64,000, another bust cannot be ruled out. Even if you’re a long-term investor and believe in the promise of this digital asset, the volatility cannot be denied. This is why both believers and skeptics should be prepared for a sudden drawdown.

However, there was no way to bet against Bitcoin in previous drawdowns. Now there is.  

Inverse Bitcoin ETF

Yesterday, the Toronto Stock Exchange approved the listing of Horizons BetaPro Inverse Bitcoin ETF (TSX:BITI). Unlike other Bitcoin exchange-traded funds (ETFs), this one doesn’t hold BTC. Instead, it holds short positions against BTC futures. In other words, its value rises when BTC drops. 

This inverse ETF is an excellent tool for traders and skeptics. If you hold BTC, this inverse ETF could protect some of the downside. It can offset losses when or if Bitcoin’s value declines. If you’re a skeptic, this is the perfect tool to help you make money when the “Bitcoin bubble pops.”

A word of caution: I do not recommend holding this inverse ETF over the long term. I believe the tool is best for traders who want to bet on the daily price movements of BTC. However, the long-term upside is capped at 100% if BTC goes to $0. However, the potential for loss is infinite. If you’re wrong, and BTC rises 100% or more, as it has since the start of 2021, you could lose most of your capital. 

Bottom line

Bitcoin is prone to boom/bust cycles. Even long-term investors who are bullish on the cryptocurrency must be prepared for a sudden drawdown. Fortunately, there is now a tool to bet against BTC and secure your position. Consider Horizons Inverse BTC ETF if you’re a skeptic or looking for downside protection on your crypto holdings. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned.

More on Tech Stocks

Tech Stocks

These 3 Cheap Stocks Would Be an Excellent Addition to Your Portfolio

Given their attractive valuation and solid growth potential, these three stocks would be an excellent addition to your portfolio.

Read more »

Growing plant shoots on coins
Tech Stocks

Market Correction: Don’t Miss These TSX Growth Stocks

Long-term investors shouldn’t miss this correction to accumulate top TSX growth stocks at prices well below their highs.

Read more »

Shopping and e-commerce
Tech Stocks

Shopify (TSX:SHOP): Why Did it Fall So Violently in 2022?

The TSX’s tech phenomenon fell sharply in 2022 due to slowing revenue growth, soaring inflation, and rising interest rates.

Read more »

Business success with growing, rising charts and businessman in background
Tech Stocks

3 Growth Stocks Worth Buying Today

With the volatility of the stock market, many investors continue to avoid growth stocks. However, here are three stocks worth…

Read more »

Online shopping
Tech Stocks

Down 80% From Record Highs, Is Shopify Stock Undervalued Right Now?

Shopify is among the worst-performing stocks on the TSX in 2022. The selloff surrounding growth stocks has dragged Shopify lower…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Tech Stocks

Could Lightspeed (TSX:LSPD) Stock Hit $50 in 2022?

The significant selloff in Lightspeed stock seems unwarranted, especially as the company has multiple growth catalysts and is delivering robust…

Read more »

analyze data
Tech Stocks

Fantastically Cheap TSX Tech Stocks

Investors should benefit from buying cheap tech stocks that are growing their profits in this market correction.

Read more »

Wireless technology
Tech Stocks

2 Quality Growth Stocks Breathe Life Into the Tech Sector

The battered technology sector has been advancing lately thanks to two quality growth stocks with pricing powers.

Read more »