In Brief:
- On Tuesday, the ProShares bitcoin-linked exchange-traded fund will make its formal debut.
- The trading will begin under the ticker “BITO”.
- The ETF will invest largely in bitcoin futures contracts and not in bitcoin itself.
ProShares officially announced on 18th October that it will launch the country’s first Bitcoin-linked exchange-traded fund (ETF). The ETF will be launched with the ticker code “BITO” and will begin trading on 19th October.
BITO will make it simple for investors to have exposure to bitcoin gains through a brokerage account. BITO can be bought and sold in the same way that stocks can, and it does so without the need for a cryptocurrency exchange account or wallet.
The proposed bitcoin futures ETFs would only be available for long positions. That means companies behind the ETFs would only be able to take long positions and will not be able to take any short positions.
ProShares CEO Michael L. Sapir said, “We believe a multitude of investors has been eagerly awaiting the launch of a bitcoin-linked ETF after years of efforts to launch one.” “BITO will open up exposure to bitcoin to a large segment of investors who have a brokerage account and are comfortable buying stocks and ETFs, but do not desire to go through the hassle and learning curve of establishing another account with a cryptocurrency provider and creating a bitcoin wallet or are concerned that these providers may be unregulated and subject to security risks,” he further added.
The ProShares Bitcoin Strategy ETF, or BITO, will invest largely in bitcoin futures contracts and not in bitcoin itself.
“1993 is remembered for the first equity ETF, 2002 for the first bond ETF, and 2004 for the first gold ETF. 2021 will be remembered for the first cryptocurrency-linked ETF,” said Sapir.
ProShares’ associate firm, ProFunds, created the first bitcoin-linked mutual fund in the United States in July of this year.
Upcoming ETFs
If the SEC doesn’t object, Invesco Bitcoin Strategy ETF will also begin trading on Wednesday, October 20. Two more are set to launch next week: the VanEck Bitcoin Strategy ETF on October 25 and the Valkyrie Bitcoin Strategy ETF on October 26. Early November could see the launch of the Galaxy Bitcoin Strategy ETF and AdvisorShares Managed Bitcoin ETF. Thus, in only two weeks, the US may see six Bitcoin futures ETFs.
The SEC approved the ProShares Bitcoin strategy ETF’s application to launch its shares on the Arca New York exchange on October 16. Following the news, Grayscale Investment also announced plans to apply to convert their bitcoin fund into a spot ETF.
The value of a spot ETF, in this case, bitcoin, will closely reflect the immediate price of the underlying asset. A futures-based fund, on the other hand, may underperform or outperform the spot price, resulting in a premium or discount. The futures market is regulated by the Commodity Futures Trading Commission and not by SEC.
