21Shares Short Bitcoin ETP: All you need to know

To short a crypto, such as Bitcoin, refers to the process of borrowing and selling a cryptocurrency with the hope that its price will decrease in the future.

It allows one to buy the asset at even lower prices later to gain profits. It is a profitable short-term investment plan that involves higher risks.

However, you do not have to deal with individual cryptocurrencies for shorting. Instead, you can invest in derivatives such as 21Shares Short Bitcoin ETP. It is an exchange-traded product (ETP) that enables you to get daily inverse profits. Let's find out what it is and how it works.

What does it mean to short Bitcoin? 

Before we move on to 21Shares short BTC, let's first discuss what exactly shorting BTC is. Shorting is a technique that enables you to make daily profits when the BTC price is depreciating. This way, you can make gains even when market conditions are tough.

It is a way of leveraging the dipping price of the coin by getting inverse profits. It means you can sell the borrowed crypto at a higher price, considering it will depreciate continually.

So, when the price of Bitcoin declines, you can buy it back and return it to the lender. This allows you to make gains from the fluctuating price of Bitcoin.

Now, many crypto trading platforms offer various types of derivatives in the form of contracts for difference (CFDs). These may also include exchange-traded products (ETPs).

What are ETPs?

A crypto ETP is an investment vehicle that uses crypto tokens as its backing. It is quite similar to traditional investment vehicles, usually backed by gold. Similarly, these products can be traded on exchanges like any other stock. 

The main difference here is that they are backed by cryptocurrencies like Bitcoin and allow you to track their performance in the market daily. A prominent example of a crypto ETP is Fidelity Physical Bitcoin (FBTC).

What’s 21Shares Short Bitcoin ETP?

It is an offering by the 21Shares platform denoted by the ticker SBTC. SBTC is a product through which you can get inverse BTC returns of -1x. The returns are based on daily price fluctuations and are multiplied by -1. Since they depend on daily price variations, you cannot hold Bitcoins for longer periods. Therefore, you must know the right holding spans and the risks involved in shorting. 

The procedure of short Bitcoin involves borrowing BTCs from the platform and selling it at the same time before the value is expected to decrease. Through this, you can generate profit from the declining price of BTC. You have to use USD or US Dollar Coin (USDC) along with BTCs as collateral for using the SBTC product.

Benefits of using SBTC

There are various upsides to opting for the SBTC product by 21Shares. Firstly, it allows you to navigate the bear cycles by offering inverse returns. Secondly, it gives you daily liquidity that can assist you in day-to-day trading. You can open and close trades within 24 hours. 

Apart from that, inverse returns can also help you in rebalancing your portfolio. Since the -1x factor resets after each day, your portfolio can adjust to the price fluctuations easily. Moreover, the platform offers an institutional standard system that can facilitate you in terms of crypto custody, trading features, and analytics. This smoothes out the entire procedure and creates convenience for you. 

What are the costs of 21Shares Short Bitcoin ETP?

According to Boerse Frankfurt, the current price of the ETP is 0.7197 for 84,845 pieces. Yesterday, the closing price was 0.7201, and there was a difference of around 0.22%, whereas the spread absolute was around 0.0015. Aside from that, the daily turnover in the number of pieces has been 13,614. 

In the past 52 weeks, the lowest difference has been 0.6794. Meanwhile, in the same period, SBTC observed the highest difference of 1.8631.

Here’s what the one-year chart for the Short Bitcoin looks like:

The chart shows that with the start of 2023, the cost of the ETP started to fall. The main reason behind it is that Bitcoin’s price has made substantial gains this year and has maintained an upward trend that started in December 2022. It affected the inverse return mechanism, which performs best when the market shows bearish signals. On the other hand, SBTC performed comparatively higher in the last five months of 2022. 

Closing thoughts

21Shares Short BTC product presents a unique investment opportunity for those looking to hedge against potential downward movements in the price of Bitcoin. The product’s inverse performance makes it highly competent for the bearish market. That’s why if you use it strategically, you can generate high returns even in bearish cycles. 

However, short Bitcoin is a high-risk and high-reward strategy. So, if you are looking to invest in SBTC, you must have an advanced level of trading knowledge. But it is advisable to be fully prepared for risk management and only invest according to your risk appetite.