Tidal Trust II has applied to the US Securities and Exchange Commission (SEC) for a Bitcoin exchange-traded fund (ETF) that aims to provide exposure when the American markets are closed.
The application comes at the same time as spot Bitcoin ETFs had their weakest month so far, with large withdrawals and increasing concerns about potential price manipulation during US market opening.
SEC application shows ETF that wants to invest in bitcoin after hours
Form N-1A, submitted on Tuesday, proposes adding two ETFs to the existing fund. These are Nicholas Bitcoin and Treasuries AfterDark ETF and Nicholas Bitcoin Tail ETF.
According to the registration document, the AfterDark ETF will not own BTC directly. The fund's exposure occurs instead through investments in Bitcoin futures, Bitcoin options, and Bitcoin ETFs or ETPs listed in the U.S.
The fund may use a subsidiary in the Cayman Islands to manage its positions. The goal is to increase value over the long term with a systematic strategy aimed at Bitcoin's nighttime returns. During the day, the fund plans to hold short U.S. Treasury bonds and liquid assets.
“When the fund uses Bitcoin futures, it trades them during U.S. nighttime and closes positions shortly after the U.S. market opens each trading day. When the fund uses Bitcoin Underlying Funds, it buys a security at the close of the U.S. market and then sells the position around market opening... When the fund uses Bitcoin options, it usually takes synthetic long bitcoin positions close to the close of the U.S. market. Positions are usually closed or reallocated at the next opening, but the fund may hold these synthetic long positions for a longer time and balance them during day trading with synthetic short positions,” states the document.
Bloomberg’s senior ETF analyst Eric Balchunas discussed the strategy in a new post on X (formerly Twitter). He mentioned that internal research last year showed that a significant portion of Bitcoin’s gains occurs during after-hours trading.
“It does not mean that the ETFs do not have an impact. Some of it depends on positioning from the ETFs or derivatives linked to flows and so on. But yes, the bitcoin After Dark ETF may provide better returns, we shall see,” wrote Balchunas.
This application comes as industry experts point to suspected price manipulation during U.S. day trading hours. Analysts see recurring patterns of Bitcoin price drops just as the market opens.
Bitcoin ETF flows and changed investor sentiment
At the same time, spot Bitcoin ETFs have been under significant pressure during the fourth quarter. Data from SoSoValue shows that monthly outflows reached a record level of 3.48 billion USD in November. BlackRock iShares Bitcoin ETF accounted for the largest share, with outflows of 2.34 billion USD.
The large withdrawals coincided with a sharp decline in the Bitcoin price, which fell by 17.4% in November. It was the worst month of the year for Bitcoin. The development has affected investor confidence and increased caution in the digital asset market.
Outflows continued into December. An additional 87.77 million USD left spot Bitcoin ETFs during the first week of the month. Despite this, there were signs that the trend was flattening out. On December 9, the funds noted a significant inflow of 151.74 million USD.
