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The Bear’s Playground: Inside the Bitcoin Short ETF

🐻 How to Use ETFs Like ProShares BITI to Profit When Bitcoin Falls.

Author

Hector Alvero
June 17, 2025

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Featured Article

Bitcoin is known for its volatility. While many investors hold it long term, others look to profit from short-term price drops. To meet this demand, financial institutions now offer short Bitcoin ETFs.

Let’s break down how they work and whether they make sense in today’s market.

Understanding Bitcoin ETFs

ETFs were created to give investors simple access to specific assets. Today, there are thousands in the U.S., covering everything from pet care to vice stocks.

Bitcoin ETFs work the same way. Firms like BlackRock and Fidelity hold bitcoin, and investors gain indirect exposure as the price rises with no self-custody required.

The Short Bitcoin ETF

Unlike long-only investors, short sellers profit when Bitcoin’s price falls.

Here’s how shorting works:

  1. Entity A borrows 10 BTC and sells it for $1 million.

  2. If Bitcoin drops to $90,000, they buy back 10 BTC for $900,000.

  3. They return the BTC and pocket $100,000.

Short Bitcoin ETFs like BITI work similarly. ProShares executes these trades, and investors receive a share of the gains (minus fees) based on their ownership.

Other ways to short Bitcoin exist, but they’re more complex and carry higher counterparty risk.

Risks of Short ETFs

While short Bitcoin ETFs can generate profits, investors should be aware of several hidden risks:

Expense Ratios

Fees can eat into returns over time. Expense ratios, which cover management and fund costs, range from 0.25% to 1.5%. Since most Bitcoin ETFs are structurally similar, choosing the lowest-fee option is key.

Ownership Structure

Don’t confuse ETFs with ETNs. ETFs represent actual ownership of bitcoin, while ETNs are debt instruments and carry credit risk—an entirely different risk profile.

Volatility and Tracking Risk

Bitcoin’s price swings can cause ETFs to deviate from the performance of the underlying index. This is called tracking risk and is common with volatile assets like Bitcoin.

Because of these risks, many investors prefer to dollar-cost average (DCA) into Bitcoin. It reduces volatility exposure over time and provides steady, long-term exposure without betting against the asset.

Curious about the different ways to go short Bitcoin? Read the full post here to find out more.

Meet the Team

Bitcoin treasury strategies are gaining momentum, but the steps to integrate Bitcoin into a business aren’t always clear.

To help this effort, our COO Hector Alvero contributed to Bitcoin for Organizations, an educational program designed to guide businesses and groups on their Bitcoin journey.

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