Defiance for Two ETFs Targeting Cryptocurrency Basis Trading

Defiance, an ETF issuer, has filed an application with the Securities Exchange Commission to launch two exchange traded funds - one linked to Bitcoin and the other to Ethereum - built around so-called "basis trading", according to US media reports. The strategy, which has been a common trading method in the cryptocurrency sector for years, aims to profit from the spread between the cash market and futures contracts: investors buy cryptocurrency tokens, sell the corresponding futures contract, earn the difference between the two, and then repeat the operation in order to obtain a stable income from the spread while largely avoiding the impact of large price fluctuations. The two ETFs, which Defiance plans to use as "NBIT" (Bitcoin-related) and "DETH" (Ethereum-related) trading codes, will essentially convert the above trading process into "one-click" ETF products. The Bitcoin version of the ETF will buy bitcoin spot funds such as BlackRock IBIT and sell short bitcoin futures on the Chicago Mercantile Exchange (CME); its expected return comes from the spread between the two markets, which is affected by factors such as volatility and demand dynamics.