The shares of the first U.S.-based bitcoin-linked exchange-traded funds rose slightly on Tuesday.
Last up about 3% was the ProShares Bitcoin Strategy ETF ticker 'BITO'. CME bitcoin futures are contracts that speculate on the future price and not the actual crypto. The fund tracks the CME Bitcoin Strategy ETF. It is designed to enable market participants to access the bitcoin market, hedge and directly expose to bitcoin pricing.
Investors in the ETF should be prepared for the possibility that the performance and price of the shares will differ from bitcoin's. This is not ideal for existing investors. Many of them have a long view about cryptocurrencies and hoped for an ETF to track physical bitcoin.
According to Coin Metrics the bitcoin price was slightly higher on Tuesday morning. It rose by 2% to $62,864, an increase of 2% from Monday. This is close to its April 14th record of 64,899, which it reached in just over a year. Bitcoin futures also gained around 2%.
The fund seeks capital appreciation through managed exposure to futures contracts in bitcoin. ProShares' website about the fund states that the fund doesn't invest in bitcoin directly. The expense ratio for the fund is 0.95%.
ETDB.com reports that ProShares is eighth largest ETF provider in terms of assets. ProShares is well-known for its funds that leverage to track movements in specific indexes multiplied by certain amounts. ProShares executives rang at the NYSE to open the trading floor for the ETF.
Since many years, the crypto industry has longed for an ETF that is related to bitcoin. Around 2017, asset managers started applying for spot bitcoin ETFs. However, their proposals were denied by the Securities and Exchange Commission. They maintained that none of them could prove market resistance to manipulation. Soon after Gary Gensler became Chairman, the agency saw a surge in applications for futures-based ETFs.
Gensler said that the product is being monitored by the U.S. Federal regulator CFTC for the past four years. "We have it here. It's being wrapped within something in our jurisdiction called the Investment Company Act of 40, so we have some capacity to bring it inside of investor safety." Gensler spoke Tuesday on CNBC's Squawk on the Street. It's still highly speculative and listeners need to understand that it still has the same volatility and speculation.
Some believe that the adoption of cryptocurrency by companies and fintechs reduces the impact of ETFs, especially those tied to futures contracts. There are many options for investors to gain indirect exposure to bitcoin, including institutional-grade funds, financial apps such as Square's CashApp and PayPal, and crypto-related equities such as Coinbase and mining stock.
