Nicholas Financial Corporation is stepping into the crypto arena with an intriguing proposal that could redefine how Bitcoin exchange-traded funds (ETFs) are managed. The company has filed documentation with the U.S. Securities and Exchange Commission (SEC) to introduce the Nicholas Bitcoin and Treasuries After Dark ETF, a fund designed to capture Bitcoin’s price fluctuations outside of traditional market hours.
The newly proposed ETF would strategically acquire Bitcoin at 4 p.m. ET, coinciding with the closing bell of U.S. stock markets, and liquidate its holdings by 9:30 a.m. ET the following day, just before the markets reopen. This unique approach is crafted to take advantage of Bitcoin’s performance during off-hours while steering clear of the volatile trading environment of standard U.S. trading sessions.
During the hours when the U.S. markets are operational, the ETF plans to transfer its assets into short-term U.S. Treasuries and cash equivalents, providing stability and mitigating risk. This strategy is firmly rooted in analytical data that indicates Bitcoin has historically seen more significant upward movements when markets are closed.
Data from Velo.xyz indicates that in the past year, Bitcoin has tended to trend positively during off-market hours, while showing less favorable performance during regular trading periods.
Further supporting this notion, ETF analyst Eric Balchunas has pointed out similar trends emerging in 2024, suggesting that influences from Bitcoin spot ETFs and derivatives positioning might be contributing to these overnight price dynamics. Balchunas noted, “Despite the turbulence during the day, an ‘After Dark’ Bitcoin ETF could promise improved returns by seizing the gains that happen overnight while avoiding the market’s more chaotic hours.”
It’s worth noting that had investors of the iShares Bitcoin ETF, symbol $IBIT, limited their trading to after hours, they would have seen a remarkable increase of 222%. Conversely, those who traded during regular hours might have faced a decline of 40.5%.
To implement its strategy, the fund could either utilize Bitcoin futures or invest in alternative Bitcoin vehicles. When engaging with futures, Nicholas Financial would conduct trades in the overnight hours, closing these positions as the market opens each day. Alternatively, while purchasing Bitcoin investment funds, it would capitalize on price shifts by acquiring securities at the end of the trading day and selling them at the opening.
Alongside this innovative ETF, Nicholas Financial is also pursuing a second product known as the Nicholas Bitcoin Tail ETF. Collectively, these offerings aim to provide investors with unique opportunities within the crypto sector.
However, while the SEC review process is underway, it remains crucial to note that approval is not guaranteed. The regulatory body will scrutinize these applications and could request amendments before granting any certification.
Historically, the SEC has greenlit various crypto investment products, including Bitcoin and Ether futures ETFs as well as staked crypto ETFs, showcasing a growing acceptance of digital asset strategies. Interestingly, the recent trend indicates a significant withdrawal from U.S. spot Bitcoin ETFs, with approximately $4 billion exiting in November alone, led by prominent players like BlackRock’s iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund.
As the landscape of cryptocurrency trading evolves, Nicholas Financial’s innovative strategy could inspire a shift in how Bitcoin is traded, providing investors a novel avenue to benefit from one of the most volatile assets in the financial market.
