New bitcoin futures ETF lets investors dip their toes in the cryptocurrency market
Shares of the nation's first exchange-traded fund tied to the cryptocurrency jumped after making their market debut on Tuesday.
The ProShares Bitcoin Strategy ETF, which trades on the New York Stock Exchange under the ticker symbol "BITO, rose 3% to $41.22 in early action a. The fund will invest mostly in bitcoin futures contracts and not directly in the cryptocurrency itself. That means the fund will invest in bets on where the digital coin will be priced in the future. The market is overseen by the Commodity Futures Trading Commission, or CFTC.
The financial product could appeal to investors who are used to buying stocks through brokerage accounts, but who are averse to trading cryptocurrencies, according to ProShares, a Bethesda, Maryland asset manager.
"We believe a multitude of investors have been eagerly awaiting the launch of a bitcoin-linked ETF after years of efforts," ProShares CEO Michael Sapir said in a news release. The new ETF will offer a venue to bitcoin to investors with a brokerage account who might otherwise not want to venture into unregulated terrain, he added.
According to Bloomberg, ProShares' bitcoin fund debuted as the second-most heavily traded ETF in market history, with investors exchanging more than 24 million shares.
The price of bitcoin topped $63,000 on Tuesday.
For years, applications to launch a bitcoin ETF have been delayed or denied by the U.S. Securities and Exchange Commission. But SEC Chair Gary Gensler recently signaled that the agency might allow crypto ETFs based on futures rather than the digital coin itself.
In a June bulletin to investors, the SEC and CFTC urged investors whose holdings are exposed to the bitcoin futures market to weigh the risks carefully, calling it a "highly speculative investment."
Beyond market volatility — the value of bitcoin more than doubled from less than $30,000 to almost $65,000 in the course of three months earlier this year — investors should weigh "the lack of regulation and potential for fraud or manipulation in the underlying Bitcoin market," the regulatory alert stated.
The price of bitcoin has more than doubled in 2021, and some investors view it as a refuge from some of the economic forces that can buffet stocks, bonds and other mainstream assets.
China's government last month banned all transactions involving cryptocurrency, and a Bank of England official last week warned the lack of regulation of cryptocurrencies could lead to an economic crash.
Ben Johnson, director of global ETF research at Morningstar, expects the emergence of bitcoin funds to build momentum for the digital currency as an investment. That includes allowing investors to short bitcoin ETFs, meaning bet that their price will fall. The funds could also allow for trading of options around them.
"The money made on all that trading activity is going to dwarf the money made just on collecting fees for those products," Johnson said.
The Associated Press contributed to this report.
