Defiance applies for a Bitcoin and Ethereum "market-neutral" ETF, allowing retail investors to use hedging fund arbitrage strategies.

The innovative field of crypto ETFs welcomes new entrants! Defiance ETFs has submitted applications for two market-neutral ETFs linked to Bitcoin (BTC) and Ethereum (ETH) to the U.S. Securities and Exchange Commission (SEC), namely NBIT and DETH. The aim is to allow retail investors to easily adopt the basis arbitrage strategies commonly used by hedge funds, capturing annualized returns of over 10% without betting on price fluctuations.

ETF Strategy Highlights: Spot + Short Futures

How it works:

Buy spot BTC/ETH ETF (such as BlackRock IBIT, ETHA)

Shorting the corresponding futures contracts at the same time.

Profit from the price difference (premium) between spot and futures.

Objective: To generate stable returns through market inefficiencies in bull markets, bear markets, and even volatile markets.

Advantages: Retail investors do not need to build complex arbitrage positions themselves and do not have to bear high margin and operating costs.

Return Data: BTC, ETH Basis Arbitrage Performance

Data provided by Bloomberg ETF analyst James Seyffart shows:

Ethereum basis trading:

The annualized return rate is about 10% for most of 2025.

During the market pressure period from the end of 2024 to the beginning of 2025, returns once dropped to single digits or even negative.

Bitcoin basis trading:

Maintain low single-digit returns in Q1 2025

Climbing to nearly 8% by the end of July

After the November 2024 election, the annualized futures premium rate once reached 17%.

Why can basis arbitrage be “market-independent”?

Basis arbitrage (Basis Trade) utilizes the phenomenon where cryptocurrency futures prices are usually higher than spot prices:

When there is a futures premium, investors can simultaneously buy spot and sell futures.

At expiration, the prices of both converge, locking in profits.

Returns are unrelated to cryptocurrency price trends and belong to a market-neutral strategy.

Defiance's encryption ETF layout

Defiance has been active in the innovation field of cryptocurrency ETFs.

Launch of leveraged single stock ETF targeting Strategy and Riot Platforms

Submit the “BattleShares” ETF, holding a long and short combination of BTC/ETH and BTC/gold.

The application for NBIT and DETH allows retail investors to directly participate in institutional-level arbitrage strategies.

Currently, the number of cryptocurrency-related ETF applications awaiting SEC approval is close to 100, and Defiance's new product will become an important member among them.

Conclusion

If Defiance's NBIT and DETH are approved, it will open the door for retail investors to hedge fund-level arbitrage strategies, allowing more investors to capture stable annualized returns of 10%+ without betting on price direction. Against the backdrop of increasing volatility in the encryption market and investors seeking low-risk returns, such market-neutral ETFs may become a new favorite for funds.