Following their market debut on Tuesday, US exchange-traded fund shares linked to cryptocurrencies soared.
ProShares Bitcoin Strategy ETF, under the ticker symbol “BITO gained 3% to $41.22 in early trading on the New York Stock Exchange. The fund will invest mainly in bitcoin futures contracts and not directly in the cryptocurrency. That means the fund will bet on the future price of the digital coin. The Commodity Futures Trading Commission, or CFTC, oversees the market.
According to ProShares, a Bethesda, Maryland asset manager, the financial product may appeal to investors used to buying stocks through brokerage accounts but not accustomed to trading cryptocurrencies.
“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.
Bloomberg reports that 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.