Tidal Trust II targets after-hours trading with ‘AfterDark’ Bitcoin ETF bet

Investment firm Tidal Trust II has filed with the U.S. SEC for a BTC ETF that will only offer “AfterDark” exposure to BTC when Wall Street closes. The Nicholas Bitcoin and Treasuries AfterDark ETF fund will also hold short-term U.S. Treasuries during the day, mirroring BTC’s overnight return profile for U.S. investors.

According to the filing, Tidal’s AfterDark ETF will not hold Bitcoin as the primary asset, but track the coin’s performance by investing in spot BTC ETFs, futures contracts, and options on indices. The company describes itself as a white label ETF solutions provider, with its filing prominently featuring an image for XFunds by Nicholas Wealth.  

Meanwhile, the Nicholas Bitcoin and Treasuries AfterDark ETF’s investment goal is to seek long-term capital appreciation. The fund will obtain BTC exposure through investment in Bitcoin Futures, U.S.-listed ETPs and/or ETFs, and Bitcoin Options. However, neither the U.S. SEC nor the CFTC has approved or disapproved of these securities.

Balchunas agrees that most BTC gains are typically after hours

Bloomberg’s Senior ETF analyst Eric Blachunas said he and other analysts looked at the idea last year and found that most Bitcoin gains occur after hours. He believes that the Bitcoin AfterDark ETF will yield better returns, although he notes that this will have to wait until the actual ETF begins trading. 

Meanwhile, the fund will represent one of the most unusual timing-based strategies yet seen in the BTC ETF ecosystem. Balchunas notes that the fund will hold BTC exclusively during overnight trading, then exit positions before the U.S. market opens. 

Several analyses in the past have revealed the disproportionate upside that occurs when U.S. equity markets go offline. The analyses particularly highlight the periods of overlap between Asia and Europe when crypto liquidity remains active. 

Additionally, the overnight behavior of BTC prices is now influential enough to impact the design of ETFs. Specialized BTC products, such as the proposed AfterDark BTC ETF, signal a maturing institutional market rather than plain speculation.  

Meanwhile, data retrieved from SoSoValue on December 9 shows that U.S. spot Bitcoin ETFs saw a net inflow of over $150 million despite an outflow of about $136 million from BlackRock’s IBIT.

Fidelity’s FBTC led with inflows of roughly $190 million, while Grascale’s GBTC experienced its first positive flow since November 22 at $17.5 million. The cumulative total net inflow as of December 9 was $ 57.71 billion, bringing the total net assets to $122.1 billion (+6.57%). 

Tidal’s U.S. SEC filing breaks down principal investment risks

According to the filing, an investment in the fund, like any other investment, entails risks. The fund may not achieve its investment goal, and there is a risk that investors could lose all or part of their investments in the fund. 

The fund’s indirect investment in BTC exposes it to the unique risks associated with the coin’s volatility, which is influenced by changes in the Bitcoin network, fluctuating acceptance levels, and unpredictable usage trends. Some or all of these risks may also adversely affect the fund’s net asset value (NAV) per share, trading price, total return, yield, and/or its ability to meet its objectives. 

The adoption and use of other blockchains, which support advanced applications such as smart contracts, also present challenges to Bitcoin’s dominance, potentially impacting its long-term relevance and utility. The development and use of Layer 2 solutions are also crucial for the functionality and scalability of Bitcoin, but they introduce risks, such as off-chain transaction execution, which could compromise security and transparency.

Derivatives risk, counterparty risk, underlying fund risk, and non-diversification risk are the other types of risks identified in the Tidal Trust II U.S. SEC filing. The AfterDark ETF is also expected to face risks associated with ETFs, regulated investment company tax risk, and new fund risk, among others.

Sign up to Bybit and start trading with $30,050 in welcome gifts