Tidal Trust II has filed an application with the U.S. Securities and Exchange Commission (SEC) for a Bitcoin exchange-traded fund (ETF) aimed at providing exposure when the U.S. markets are closed.
The application comes at a time when spot-BTC ETFs experienced a record weak month, amid heavy outflows and growing concerns about possible price manipulation as U.S. markets open.
The SEC's announcement reveals an ETF that aims to invest in Bitcoin outside of trading hours.
The Form N-1A submitted on Tuesday proposes the addition of two ETF funds to the existing fund. These are the Nicholas Bitcoin and Treasuries AfterDark ETF and the Nicholas Bitcoin Tail ETF.
According to the registration document, the AfterDark ETF does not hold BTC directly. Instead, exposure is sought through Bitcoin futures, Bitcoin options, and Bitcoin ETFs or ETPs listed in the United States.
For investment management, the fund may utilize a subsidiary based in the Cayman Islands. The goal is to achieve long-term capital growth through a systematic approach targeting Bitcoin's 'nighttime returns.' During the day, the fund holds short-term U.S. Treasury bills and cash equivalents.
When the fund uses Bitcoin futures, these instruments are traded during U.S. nighttime hours, and the position is closed soon after U.S. markets open each trading day. When using Bitcoin Underlying Funds, the fund purchases the security when U.S. markets close and sells the position when markets open…. When using Bitcoin options, the fund typically opens option positions that create a synthetic 'long bitcoin' position at the end of regular U.S. trading hours. These positions are usually closed or unwound around the next market opening, but the fund may hold these synthetic long positions longer and rebalance them during the day by opening a synthetic short position,” the document states.
Bloomberg's senior ETF analyst Eric Balchunas discussed the strategy in a recent X (formerly Twitter) post. According to him, internal research from last year showed that a significant portion of Bitcoin's returns occurs during after-market hours.
This does not mean that ETFs do not have an impact. Part of this is due to positioning caused by ETFs or derivatives based on flows, etc. But yes, the Bitcoin After Dark ETF can potentially offer better returns, we'll see,” Balchunas wrote.
This application comes at a time when industry followers are emphasizing claims of price manipulation during U.S. daytime trading hours. Analysts have identified a recurring pattern where the price of Bitcoin declines in conjunction with market openings.
Bitcoin ETF investments and the change in investor sentiment
At the same time, spot Bitcoin ETFs have been under significant pressure in the fourth quarter of the year. According to SoSoValue data, monthly outflows reached a record $3.48 billion in November. BlackRock's iShares Bitcoin ETF had the largest share, with $2.34 billion in outflows.
Strong sell-offs coincided with a time when the price of Bitcoin fell sharply – a decline of 17.4% occurred in November, which was the weakest monthly return of the year. This has affected investor confidence and increased caution in the digital asset markets.
Outflows continued in December, with an additional $87.77 million leaving spot Bitcoin ETFs in the first week of the month. However, the trend appeared to stabilize somewhat. On December 9, the funds recorded a particularly significant rebound, with $151.74 million flowing into them.
