The first bitcoin-linked exchange-traded fund in the US surged Tuesday.
The ProShares Bitcoin Strategy ETF (BITO) rose 4.8% to $41.94. The fund monitors CME bitcoin futures, rather than the cryptocurrency itself.
That implies the ETF’s price and performance may differ from the price of bitcoin. This isn’t ideal for existing investors, who hoped for an ETF that would track actual bitcoin that investors could buy and hold.
Bitcoin rose almost 4% Tuesday to $64,206.51, according to Coin Metrics, only 1% behind its all-time high of $64,899.
The launch exemplifies the ETF industry’s rapid expansion, said Roundhill Investments CEO Will Hershey.
“Day one trading volumes are exceptional,” Hershey said of BITO. “BITO has surpassed $700 million notional. That puts it ahead of retail ETF favorites like BUZZ and ARKX on their first day compared to earlier this year.
When the SPDR S&P 500 ETF originally launched in 1993, it traded around $40 million. By the end of the session, BITO had exchanged $984 million.
According to ETDB.com, ProShares is the eighth-largest ETF provider. These funds monitor changes in particular indices multiplied by a certain amount. ProShares executives rung the NYSE’s opening bell. The expense ratio is 0.95 percent.
The crypto community has been clamoring for ETF for years. The Securities and Exchange Commission rejected asset managers’ attempts to launch spot ETFs in 2017, claiming none could demonstrate market resistance to manipulation. Applications for futures-based ETFs exploded this year, just after Chairman Gary Gensler took over.
In an interview with CNBC’s “Squawk on the Street,” Gensler stated the new ETF has been supervised by the CFTC for four years and is governed by a law called the Investment Company Act of 1940. “It’s still a highly speculative asset class, and investors should be aware of that.”
Investors indirectly own bitcoin
An ETF, especially one linked to futures contracts, may have less influence if firms and fintechs adopt crypto. Investors can indirectly own bitcoin through institutional funds, banking apps like PayPal and Square CashApp, or crypto-related companies like Coinbase and mining stocks.
A new investment class will be able to benefit from bitcoin as a genuine asset, according to Anthony Bertolino, VP of growth at iTrustCapital. A derivatives-based ETF is not the long-term solution. One of the most appealing features of bitcoin is its 24/7 liquid bearer market. In ten years, I expect certain ETFs will offer actual redemption for individuals who want it.”