Defiance’s New ETFs Let Traders Bet For—and Against—Bitcoin, Ethereum, and Gold Simultaneously

Wall Street’s latest crypto gambit just dropped—a hedge fund’s dream wrapped in an ETF. Defiance’s new funds let investors go long or short Bitcoin, Ethereum, and gold in one slick package. Because why pick a side when you can profit from both?

The move taps into growing demand for sophisticated crypto exposure—and gives institutional players another way to hedge their bets (or double down). Gold’s inclusion feels like a nostalgic nod to the ’safe haven’ crowd—how quaint in 2025.

One thing’s certain: the suits have finally figured out that crypto volatility isn’t a bug—it’s a revenue stream. Just don’t ask them to explain the blockchain part.

Synthetic exposure to long Bitcoin, short Ethereum

Rather than holding spot assets, the funds establish leveraged exposure using a combination of futures contracts, swaps, options, and US-listed ETFs or exchange-traded products (ETPs).

According to the prospectus, the structure of ETFs aims to take advantage of price differentials between long and short asset pairs. 

The investment thesis behind the Bitcoin vs. Ether ETF is to generate returns when Bitcoin outperforms Ether over the holding period. Conversely, the Ether vs. Bitcoin ETF is for investors anticipating stronger performance from Ether.

None of the ETFs invest directly in the assets they track. Instead, they gain exposure using financial instruments issued by other funds or derivatives markets. 

Where necessary, up to 25% of assets may be allocated to a Cayman Islands subsidiary to maintain favorable US tax treatment under Regulated Investment Company (RIC) rules.

The filing adds that the derivative structure allows the funds to avoid custody risks associated with direct holdings of digital assets or physical gold. 

Still, this structure introduces additional complexity, including exposure to counterparty risk, tax constraints, and high turnover due to frequent rebalancing.

High-turnover strategy and operational design

The funds are designed to be non-diversified and will have high portfolio turnover due to frequent rebalancing driven by market volatility, asset momentum, and derivative expiration cycles. 

The strategy involves continuously adjusting exposure to maintain target leverage and balance between the paired long and short positions.

Due to leverage, investors may see amplified gains or losses relative to the underlying asset movements. The product documentation notes that performance is based on relative, not absolute, asset values, making the ETFs unsuitable for directional exposure to a single asset.

The year-to-date performance of the “long Bitcoin, short Ethereum” strategy would be highly profitable for investors. As of press time, BTC is up by 1%, while ETH is down by nearly 47% in the same period.