Tidal Trust II has submitted an application to the U.S. Securities and Exchange Commission (SEC) for a Bitcoin ETF that provides exposure even when the U.S. market is closed.
This application was made amid fears of large net outflows and the possibility of price manipulation within U.S. market opening hours, as the spot Bitcoin ETF recorded its worst month ever.
SEC, Bitcoin After-Hours Trading ETF Disclosure
The N-1A form submitted on Tuesday includes a proposal to add two ETFs to the existing fund. This includes the Nicholas Bitcoin and Treasuries After Dark ETF and the Nicholas Bitcoin Tail ETF.
According to the registration documents, the After Dark ETF does not directly hold Bitcoin (BTC). Instead, it gains exposure through investments in Bitcoin futures, options, Bitcoin ETFs, or ETPs listed in the U.S.
The fund may utilize a subsidiary in the Cayman Islands for position management. The goal is to achieve long-term capital growth through a systematic approach targeting Bitcoin's overnight returns. Meanwhile, the fund holds short-term U.S. Treasury and cash-like assets during weekly trading hours.
“When utilizing Bitcoin futures, the fund trades the product during U.S. overnight hours and settles it right after the U.S. market opens each trading day. When using Bitcoin-related underlying funds, securities are bought at U.S. market close and positions are sold in line with the next day's U.S. market open…. When using Bitcoin options, the fund typically enters into option trades to establish a synthetic long position in Bitcoin around the time of regular U.S. market close. This position is usually settled or unwound around the next market open, but the fund may maintain that synthetic long position over the long term and enter a synthetic short position during U.S. weekly trading hours to offset it.” – The document
Bloomberg's senior ETF analyst Eric Balchunas recently mentioned this strategy in a post on X (formerly Twitter). He pointed out that internal research from last year indicated that a significant portion of Bitcoin's returns occurred in after-hours trading.
“This does not mean that the ETF has not gained influence. Some of it is due to positioning related to the ETF or impacts from derivatives based on fund flows. However, the Bitcoin After Dark ETF may have a chance for better returns, so we will keep an eye on it.” – Eric Balchunas, Bloomberg Senior ETF Analyst
This application was submitted at a time when industry observers are focusing on allegations of cryptocurrency price manipulation within U.S. weekly trading hours. Analysts have uncovered a pattern of Bitcoin prices repeatedly falling around market open.
Bitcoin ETF Fund Flow…Change in Investor Sentiment
Meanwhile, the spot Bitcoin ETF has been under significant pressure throughout the fourth quarter. According to SoSoValue data, the net outflow in November reached an all-time high of $3.48 billion on a monthly basis. BlackRock's iShares Bitcoin ETF accounted for the largest share at $2.34 billion.
This large-scale withdrawal coincided with a sharp drop in Bitcoin prices, which fell 17.4% in November, marking the worst monthly performance of the year. This has led to a decline in investor confidence and renewed caution across the digital asset market.
Net outflows continued in December, with $87.77 million added out of the spot Bitcoin ETF in just the first week of the month. However, some signs of stabilization have also emerged. On December 9, there was a net inflow of $151.74 million, showing a strong rebound.
