Defiance ETFs recently made headlines with their applications for Bitcoin and Ethereum related market-neutral exchange-traded funds (ETFs) known as NBIT and DETH. This strategic move involves executing a hedge fund arbitrage strategy, as detailed by Bloomberg senior ETF analyst Eric Balchunas on September 16.
The unique approach of these funds involves buying spot crypto assets like Bitcoin and Ethereum ETFs such as BlackRock’s IBIT and ETHA, while simultaneously shorting futures contracts to capture premiums. This strategy aims to generate profits by exploiting the price differentials between spot and derivatives markets.
According to Bloomberg ETF analyst James Seyffart, Ethereum basis trades have delivered gross annualized returns averaging around 10% during stable market conditions. Similarly, Bitcoin basis trades have shown gross yields reaching 11%, with some periods even touching double digits during volatile market phases.
Seyffart’s analysis further reveals that Ethereum basis returns have maintained yields around 10% for much of 2025, despite experiencing single-digit and negative performance during market stress from late December 2024 through mid-March 2025. On the other hand, Bitcoin’s basis trade has generated consistently low single-digit returns in the first quarter, eventually climbing to levels near 8% by late July.
The basis trade strategy capitalizes on the premiums that cryptocurrency futures contracts typically command over spot prices. For instance, Bitcoin futures premiums reached 17% annualized following the November election before moderating to current levels.
Defiance ETFs has a track record of introducing innovative crypto-adjacent products. In addition to the NBIT and DETH ETFs, the company has launched leveraged single-stock ETFs targeting companies like Strategy and Riot Platforms, which are considered Bitcoin proxy companies. Defiance has also filed “BattleShares” ETFs that hold long and short positions across Bitcoin versus Ethereum and Bitcoin versus gold pairs.
The latest filings from Defiance ETFs add to the growing number of nearly 100 crypto-related ETF applications awaiting a decision by the US Securities and Exchange Commission. These proposed funds aim to make an institutional strategy accessible to retail investors, eliminating the need for significant capital requirements and operational complexity required to execute basis trades independently.
In conclusion, Defiance ETFs’ strategic move towards market-neutral ETFs for Bitcoin and Ethereum showcases their commitment to innovation and providing unique investment opportunities in the rapidly evolving cryptocurrency market.