BITI is designed to provide daily investment results, before fees, expenses, distributions, brokerage commissions and other transaction costs that endeavour to correspond to up to one-times (100%) the inverse (opposite) of the daily performance of an index that replicates the returns generated over time through long notional investments in Bitcoin Futures. The current Underlying Index of BITI is the Horizons Bitcoin Front Month Rolling Futures Index (Excess Return). BITI does not seek to achieve its stated investment objective over a period of time greater than one day.
Important Risk Considerations
The ETF is very different from most other exchange-traded funds. The ETF is an alternative mutual fund within the meaning of National Instrument 81-102 Investment Funds (“NI 81-102”), and is permitted to use strategies generally prohibited by conventional mutual funds, including with respect to the use of specified derivatives, the ability to employ leverage and borrow cash. While these strategies will only be used in accordance with the investment objectives and strategies of the ETF, during certain market conditions they may accelerate the risk that an investment in ETF Shares decreases in value.
The ETF is not a conventional investment, is highly speculative and is very different from other Canadian exchange traded funds. The ETF is designed to provide investment results that endeavour to correspond to up to one times (100%) the inverse (opposite) of the daily performance of the Horizons Bitcoin Front Month Rolling Futures Index (Excess Return) (the “Underlying Index”). The Underlying Index tracks Bitcoin Futures (as defined in the Glossary). The Underlying Index tracked by the ETF is highly volatile. As a result, the ETF should not be viewed as a stand-alone long term investment.
Given the speculative nature of bitcoin and the volatility of the bitcoin markets, there is considerable risk that the ETF will not be able to meet its investment objectives. An investment in the ETF is not intended as a complete investment program and is appropriate only for investors who have the capacity to absorb a loss of some or all of their investment. An investment in the ETF is considered high risk.
The performance of the Underlying Index to which the ETF is exposed, and therefore the performance of the ETF, can be expected to be very different from the spot prices of bitcoin on various crypto-asset trading venues (the “Bitcoin Prices”). The value of the Underlying Index may not be correlated to Bitcoin Prices. An investor should only consider an investment in the ETF if he or she understands all of the consequences of being negatively exposed to Bitcoin Futures.
Investors should monitor their investment in the ETF at least daily.
BITI, before fees and expenses, does not and should not be expected to return the precise inverse (i.e., up to -100%) of the return of its Underlying Index over any period of time other than daily.
The returns of the ETF over periods longer than one day will, under most market conditions, be in the opposite direction from the performance of its Underlying Index for the same period, and the returns of the ETF can, based on historical returns, generally be expected to be substantially similar to the inverse performance of its Underlying Index for the same period, when the ETF’s exposure is at -100% of the Underlying Index throughout the period. However, the deviation of returns of the ETF from the inverse performance of its Underlying Index can be expected to become more pronounced as the volatility of the Underlying Index, and/or the period of time, increases.
For a discussion of the risks associated with an investment in ETF Shares, see “Risk Factors”.
If at any time during which the ETF is seeking to provide one times (100%) the inverse (opposite) of the daily performance of the Underlying Index, the trading price of the front-month, or, when applicable, the frontmonth or second-month, Bitcoin Futures contract to which the ETF is exposed increases by 95% or more from the prior settlement price of that Bitcoin Futures contract, the ETF would be expected to lose all or substantially all of its net asset value (and any value remaining, if any, would immediately be held in cash or cash equivalents only). If at any time the ETF is seeking to provide exposure less than, one times (100%) the inverse (opposite) of the daily performance of the Underlying Index, the ETF may also lose all or substantially all of its net asset value if the trading price of the front-month, or, when applicable, the front-month or second-month, Bitcoin Futures contract to which the ETF is exposed increases by more than 100% from the prior settlement price of that Bitcoin Futures contract. An investment in ETF Shares of BITI is speculative, involves a high degree of risk and is only suitable for persons who are able to assume the risk of losing their entire investment.