New XFUNDS ETF toggles between bitcoin overnight and Treasuries by day

A new exchange-traded fund (ETF) from XFUNDS is offering a mix of bitcoin exposure and short-term U.S. Treasuries, shifting between the two over the course of the day.

Launched on Wednesday, the Nicholas Bitcoin and Treasuries AfterDark ETF (NGHT) takes on indirect bitcoin exposure after traditional U.S. markets close and shifts back into cash and U.S. government bonds at the next open.

“Bitcoin trades 24/7, and its behavior is increasingly driven by global activity outside U.S. market hours,” XFUNDS CEO David Nicholas, explaining the strategy behind the new fund. 

The fund aims to “systematically isolate bitcoin’s overnight alpha,” where the largest share of returns has historically occurred, while reducing exposure during daytime trading when bitcoin often moves in lockstep with U.S. stocks. 

Bitcoin ETF competition

The NGHT launch comes as competition among spot bitcoin ETFs is seeing a major shake-up.

Also debuting on Wednesday was Morgan Stanley's MSBT spot bitcoin ETF, with its 0.14% fee undercutting products from top players like BlackRock and Grayscale.

The bank’s distribution reach, with roughly 16,000 financial advisors overseeing trillions of dollars in client assets, is expected to make it a significant entrant.

Bloomberg ETF analyst Eric Balchunas projected that MSBT could reach "$5 billion in assets under management in the first year and $30 million in day one volume."

Meanwhile, flows into spot bitcoin ETFs are picking up again after five months of heavy losses that saw billions in investor outflows, according to The Block's bitcoin ETF data.

U.S.-listed funds pulled in about $471 million in net inflows on Monday, the largest single-day total in six weeks, led by BlackRock’s iShares Bitcoin Trust and Fidelity’s FBTC.