New Bitcoin ETF chases gains that come while Wall Street sleeps

Most of Bitcoin’s gains have come while Wall Street sleeps. Now a new exchange-traded fund is built to ride that pattern — buying Bitcoin at the market close and selling before the open, while investing in Treasuries during the day.

The Nicholas Bitcoin and Treasuries AfterDark ETF, filed with the US Securities and Exchange Commission in December under the ticker NGHT, made its debut on Wednesday.

The product is designed around a striking disconnect in Bitcoin’s return profile. Since BlackRock’s iShares Bitcoin Trust ETF (ticker IBIT) launched in January 2024, overnight price gaps — measured from the market close to the following day’s open — have generated a roughly 200% gain, according to Bespoke Investment Group, a figure that outpaces a buy-and-hold strategy that rose more than 40%. In contrast, the tactic that involves buying at the open and selling at the close a loss of more than 50%.

The fund, managed by boutique wealth manager Nicholas Wealth, will take long Bitcoin exposure via swaps at 4 p.m. Eastern time and exit by 9:30 a.m. the following morning. During US trading hours, capital rotates into short-term Treasuries. It does not hold Bitcoin directly.

“We think of diversification, typically, as asset class diversification,” said David Nicholas, CEO of Nicholas Wealth. “But really there may be a new segment of diversification, which is time diversification.”

Nicholas said the ETF wrapper offers a tax advantage over investors attempting the strategy themselves, because the fund’s daily buying and selling doesn’t generate taxable events for shareholders the way individual trades would.

The overnight-versus-intraday split in Bitcoin mirrors a pattern that has been well-documented in equities for decades. Research from the Federal Reserve Bank of New York and academics published in 2021 found that the bulk of the equity risk premium in the S&P 500 has historically accrued outside regular trading hours, a phenomenon sometimes referred to as the overnight drift. Still, a pair of ETFs designed to profit from overnight gains on US stocks liquidated in 2023 after just about a year of trading.

In Bitcoin’s case, analysts have pointed to several explanations for the effect: global crypto-native capital trading during Asian and European hours; thinner overnight liquidity amplifying moves; and US-session selling pressure tied to ETF hedging, rebalancing and derivatives positioning. According to calculations by Bloomberg Intelligence’s Athanasios Psarofagis, the average daily opening gap for IBIT clocks in at around 2%.

“Bitcoin’s volatile nature, round-the-clock trading and after-hours gains mean there tend to be large gaps between the price of an ETF at the beginning of the trading day and previous closing prices,” he said in a recent note.

NGHT reflects a broader evolution in the ETF industry toward strategies that treat timing, structure and market structure as investable edges. The new ETF adds to a rapidly expanding universe of Bitcoin and various other crypto products that now includes more than 140 US-listed funds.

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