Novel ETF Strategy Targets Overnight Bitcoin Performance
Investment firm Tidal Trust II has filed with the U.S. SEC for a Bitcoin ETF that will exclusively offer "AfterDark" exposure to BTC when Wall Street closes. The Nicholas Bitcoin and Treasuries AfterDark ETF fund is designed to hold short-term U.S. Treasuries during regular trading hours and track Bitcoin's performance overnight for U.S. investors.
According to the filing, Tidal's AfterDark ETF will not directly hold Bitcoin as its primary asset. Instead, it will track the cryptocurrency's performance by investing in spot BTC ETFs, futures contracts, and options on indices. The company identifies itself as a white label ETF solutions provider, and the filing prominently features an image associated with XFunds by Nicholas Wealth.
The investment goal of the Nicholas Bitcoin and Treasuries AfterDark ETF is to achieve long-term capital appreciation. The fund plans to gain Bitcoin exposure through investments in Bitcoin Futures, U.S.-listed Exchange Traded Products (ETPs) and/or ETFs, and Bitcoin Options. It is important to note that neither the U.S. SEC nor the CFTC has yet approved or disapproved these specific securities.
Analysis Supports "After Hours" Bitcoin Gains
Bloomberg's Senior ETF analyst, Eric Balchunas, shared insights indicating that he and other analysts previously examined this strategy. Their findings suggested that the majority of Bitcoin's price gains typically occur during after-hours trading. Balchunas expressed optimism that the Bitcoin AfterDark ETF could potentially yield better returns, though he acknowledged this will only be verifiable once the ETF begins active trading.
This proposed fund represents one of the more unconventional timing-based strategies to emerge within the Bitcoin ETF landscape. Balchunas highlighted that the fund's operational model involves holding Bitcoin exclusively during overnight trading sessions and liquidating positions before the U.S. market opens the following day.
Previous analyses have indicated a disproportionate upside in Bitcoin's price movements when U.S. equity markets are closed. These analyses have particularly pointed to the periods of overlap between Asian and European trading hours, during which crypto liquidity remains robust.
The overnight price behavior of Bitcoin has become significant enough to influence the design of new investment products. The emergence of specialized Bitcoin products like the proposed AfterDark BTC ETF signals a maturation of the institutional market, moving beyond simple speculative interest.
In related news, data from SoSoValue on December 9 revealed that U.S. spot Bitcoin ETFs experienced a net inflow of over $150 million. This occurred despite an outflow of approximately $136 million from BlackRock's IBIT. Fidelity's FBTC led the inflows with roughly $190 million, while Grayscale's GBTC saw its first positive flow since November 22, amounting to $17.5 million. The cumulative total net inflow as of December 9 reached $57.71 billion, bringing the total net assets to $122.1 billion, representing a 6.57% increase.
SEC Filing Details Principal Investment Risks
The SEC filing from Tidal Trust II outlines the inherent risks associated with an investment in the fund. Like any investment, there is no guarantee that the fund will achieve its investment objective, and investors risk losing all or a portion of their invested capital.
The fund's indirect exposure to Bitcoin subjects it to the unique risks associated with the cryptocurrency's volatility. This volatility can be influenced by changes within the Bitcoin network, fluctuations in adoption rates, and unpredictable usage trends. Any of these risks, or a combination thereof, could negatively impact the fund's net asset value (NAV) per share, its trading price, its total return, its yield, and its ability to meet its stated objectives.
Furthermore, the increasing adoption and use of other blockchains, which support advanced functionalities such as smart contracts, pose challenges to Bitcoin's long-term dominance and could affect its relevance and utility. The development and implementation of Layer 2 solutions are also critical for Bitcoin's functionality and scalability but introduce their own risks, including the potential for compromised security and transparency through off-chain transaction execution.
The Tidal Trust II U.S. SEC filing also identifies other significant risks, including derivatives risk, counterparty risk, underlying fund risk, and non-diversification risk. The AfterDark ETF is also expected to encounter risks associated with ETFs in general, regulated investment company tax risks, and risks inherent to new fund launches, among others.