New ETF Proposal Targets After-Hours Bitcoin Gains

A recent filing by Tidal Trust aims to introduce an exchange-traded fund (ETF) designed to hold Bitcoin during off-market hours.

Key Takeaways

Tidal Trust is launching a new Bitcoin ETF to operate during off-market hours.
The ETF aims to buy BTC after US trading closes and sell it at market opening, avoiding daily price volatility.
The asset allocation strategy includes US Treasuries and other cash equivalents during daytime.
This approach may enhance returns, particularly as many Bitcoin gains occur after hours.
The SEC has yet to approve the filing, which may be subject to changes.

New ETF proposal bets Bitcoin returns are made after hours

In its filing to the US Securities and Exchange Commission (SEC) on Tuesday, Tidal Trust II submitted a Form N-1A registration statement to integrate two Bitcoin-related ETFs managed by Nicholas Wealth Management into its portfolio. Among these offerings is the Nicholas Bitcoin and Treasuries AfterDark ETF, which plans to purchase BTC exclusively after US market hours and sell it at the market's opening. This strategy essentially means that the fund will hold its Bitcoin throughout the day.

According to the SEC filing, “When utilizing Bitcoin Futures, the Fund trades these instruments during US overnight hours and concludes transactions shortly after the US market opens each trading day.” The document further explains, “When utilizing Bitcoin Underlying Funds, the Fund purchases a security at the close of the US market and then sells it around the opening, allowing it to capture any market movement that takes place during overnight hours.”

Investments, SEC, Trading, Bitcoin ETF, ETF Tuesday SEC filing for ‘AfterDark’ Bitcoin ETF. Source: SEC

Tidal Trust has indicated that during daytime hours, the ETF will allocate its assets to US Treasuries, money market funds, and other cash equivalents. This investment approach could help traders minimize risks associated with Bitcoin's potential price volatility while still maintaining a connection to the cryptocurrency.

Eric Balchunas, an ETF analyst, shared his insights on the proposal, saying, “We looked at this last year and found that most of the gains happen after hours. That doesn’t mean ETFs aren’t influencing the market. Some of this is positioning due to the ETFs or derivatives based on various flows. However, the Bitcoin After Dark ETF could potentially yield better returns.”

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It’s important to note that the SEC’s approval of this filing is not guaranteed and may undergo changes. The regulatory body has already approved various crypto-related investment vehicles, including Bitcoin and Ether futures ETFs, spot digital asset ETFs, and staked crypto ETFs.

Record Outflows from US Spot Bitcoin ETFs in November

November saw a significant surge in outflows from spot Bitcoin ETFs listed on US exchanges, with approximately $4 billion withdrawn. BlackRock’s iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund experienced the largest redemptions, being two of the most substantial ETFs available.

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